The linchpin of American energy independence is the mechanism for bulk distribution of energy from coast to coast.  That is a national electricity grid- a backbone of very high voltage electricity lines designed not to go 10s of miles inside of the region of a utility, but to go interstate distributing energy from solar and wind farms in the west to large population centers in the northeast. 

Such an electricity grid will have powerful enemies.  When regions are isolated, utilities have market power, but when a grid connects them, energy can be purchased from other providers, driving up competition and driving costs down.  A bulk electricity transmission grid is a threat to big fish in small ponds, because when all ponds are connected, one large fish is unable to control what goes on in the pond.

The central job for any energy czar will be construction of the national grid.  It need not interfere with established systems within regional authorities, anymore than an interstate highway system dictates what states may do with their own state highways, and cities do with their own arterials. 

Such a czar will be subjected to intense political and psychological pressure to trim the giant agenda not just with the energy grid, but in establishing petroleum and vehicle policies that will revolutionize the oil and authomotive industries. 

The person must have a formidable will, already be intimately aware of energy policy, especially the building of power transmission infrastructure with a demonstrated ability to face down energy industry adversaries and be unafraid to be decisive.

It is a challenging list of requirements.  Is there anyone in America that could rise to the challenge with vigor?

There is: Arnold Schartzenegger. 

One side benefit- the vacated governor spot goes to democrat John Garamendi, endorsed by Sierra Club, Al Gore, etc.  There will be a lot of infrastructure $$$ to California, and a democrat ought to get the political payoff for the next election in 2010. 

Harold Ford proposed on MSNBC's 1600 Pennsylvania yesterday that one idea for assistance to the auto industry would be the tax rebates for "plug in hybrids".  He mentionned that more fuel efficient vehicles cost between $2300 and $3000 more.  Mr. Ford suggested that the money go to consumers rather than car companies since money going directly to companies might be mispent. 

Arms length interaction with the economy has been the previous rule for the relationship between government and industry, and Mr. Ford is going one step further at indirection.  But note that the arms length rule and the voodoo religion of self interest has even been repudiated by Alan Greenspan, so I have to disagree with the general idea that we let the market decide how the money flows in a classic laissez-faire fashion.  The auto building activity generated from such incentives could just as easily take place in GM factories in China.   Where is the rule or the federal representative that has the power to halt such a move dictated by the logic of corporate self interest?

As a counter proposal, we need to specify production in the US, and provide for intrusive oversight by observers knowlegable about automotive engineering.  Further, since consumers aren't buying and won't be for a few years, it is sensible alternative to build inventories of components for future models.  It is money in the bank and it keeps factories open in the US.  Note that this inventory while financed by the US government represents capital that can be recovered when the compenents are used.

Mr. Ford was working off an idea from previous congressional hybrid car legislation that has been vetted, and that is the cautious thing to do on national television.  However, his aides need to work harder.  There is a huge difference between hybrids and plug in hybrids.  Plug in hybrids are not built by any of the majors (US or Foreign).  The Ford Escape hybrid SUV manufactured in the US is currently upgradable by a US (Hymotion-a123systems) product to a PHEV for $32K, and this would be cheaper if done in the factory.  No doubt the same could be done for hybrids built by GM.  Second.  While it is true that a "Hybrid" vehicle will cost $2300 to $3000 more per vehicle, for a plug in hybrid compact, the battery alone necessary for a 40 mile all electric range costs $10,000.  GM's target is to get the cost down to 63 cents per watt, but current costs are around one dollar per watt, so the 12KWH battery needed for compact cars like the Volt or Prius will require in excess of $10K.

Financing PHEVs can be done with a revenue neutral program to self pay these batteries by surcharging the electricity needed to fuel the cars as if they were being fueled by gasoline.  This leverages the higher price of gasoline (electricity in most of the US represents 89 cent per gallon "gasoline" (electricity at national average of 10 cents per KWH that will take current technology PHEVs the same distance as an gasoline equipped vehicle).  This is revenue neutral if the cost of gasoline is at $3.50, a price point which will return to when the global economy is booming again.   Further details on this particular revenue neutral plan may be found at policypedia.

But the question is, how do we know that GM, Ford, or Chrysler will build the fuel efficient vehicle in the US?  Currently, GM is closing factories in the US and building them in China.  Koppel had a special on China that noted that the most successful car company in China is GM (along with VW), and that more Buicks are being sold in China than America (Because it was a favorite of the emperor and the former ruling elite, it is the prestige car ahead of Mercedes and the like).  

The point is, if Congress incented only electric vehicles, they would be paying for Toyotas and Renaults made in the third world.  If they narrowed it to GM, Ford and Chrysler, why wouldn't these be manufactured somewhere else besides the US?   If we want these factories kept open, Congress needs to directly specify that the money be spent to build electric car components in the US. 

Rather than provide capital that auto company management may use in ways that are contrary to the purpose of the stimulus, we should do the following in order to keep the auto companies functioning.

The federal government should buy Volt technology from GM, and pay auto companies to keep auto factories open building a large electric car component inventory for use when the economy recovers and consumers are ready to buy cars again.  This stimulus is net revenue neutral because the components are just financed, and the money comes back into the treasury as the inventories are drawn down.

Note:  If you have a suggestion, please go to Change.Gov and post it there first, then come back here if you'd like to discuss an idea.  This is intended to be an ongoing discussion thread referenced by the Change.Gov Blog here on Partybuilder.  Please post responses to this agenda item even if weeks have passed since the last comment.  For other agenda items on Change.gov, please quote and link the items, for example as done in the following discussion.  

Regarding agenda item: Energy and Evironment, "1 Million plug in Hybrids"

The current agenda item reads: "Put 1 million Plug-In Hybrid cars -- cars that can get up to 150 miles per gallon -- on the road by 2015, cars that we will work to make sure are built here in America. "

We need much more aggressive plug in hybrid (PHEV) production targets.  1 million PHEVs by 2015 is less than one half of one percent of the US car fleet.  We will never get to our energy independence and global warming targets by such timid toe testing of the water.  The goal needs to be that half of US passenger car sales must be PHEV20 (20 mile range on electricity only) or better by 2015.  Since consumer demand is low and the US auto industry is ailing, the federal government should keep the factories open by financing the production of electric vehicle componenents that will be warehoused and sold back to auto companies in the coming years.

Here is why the bar is set to low: In 2006, 427,000 Camry sedans were sold in the United States.  Since the Chevrolet Volt begins production in 2010, if GM alone sold electric vehicles, their total production would have to be only one half of what Toyota does in one year with the Camry alone.  Can GM jump that bar?  Of course it can.  It's like sending a knight to chop down a tree.  You don't inspire anyone to greatness that way.   The current goal of 1 million PHEVs by 2015 is an unworthy goal and setting easy goals is foolish management. 

Dog paddling against a tidal wave: There are 250 million registered vehicles in America today, so at this rate, we won't have the fleet, so if it takes 5 years for each million, the fleet won't be transformed for a thousand years.  It is very difficult to believe that America cannot do better given 5 years, and given that GM has the necessary technology today. 

Leadership consists of setting the bar high enough to challenge a people to do their best.  FDR was confident that the aggressive wartime production goals he set were achievable and waved off his skeptical staff's objections.   

What would be a more aggressive goal?  How about that by 2015 that half our car sales are PHEV? That means 3 million per year.  Is it plausible that there are federal intervention schemes and manufacturing capablity to pull this off?  Sure, but Kennedy did not tell von Braun how to get to the moon.  He talked to the scientists and knew the goal was achievable.   It might mean buying PHEV technology from GM and licencing it to all American car manufacturers.  It might mean paying for the cost of the batteries by phasing in a gas tax- 15 cents per year until the price reaches $3.50 per gallon.   That might mean providing self paying loans for the added cost of the batteries that pay themselves off by electricity surcharged at a rate equivalent to $3.50 gasoline. 

By 2012, we need to have a standardized metering communication interface for PHEV vehicles, to facilitate commerce in electricity recharging at work and in public places.  This might be something similar to interfaces  that V2green has develeoped, and might take into consideration standards for smart charging that would aid grid stabilization.

The core of Obama's approach was staring everyone in the face.

As a community organizer what did he do?  He mobilized people to vote, because what he realized was that the current power structure relied on the principle that those that care most about progressive issues are those that are the most easily dispirited. 

Nixon tried to take ownership of the silent majority, but it was Reagan's strategists that knew that the reality was that majority was not behind them, and the key was to discourage most people from voting. 

There will be a massive victory tomorrow, but the real question none of the pundits will aggressively pursue is whether this is a one off.  For example,  Tell me why the people that showed up for Barack would show up in a runoff of Chambliss against Martin in GA.  Tell me why the Obama online community doesn't just evaporate after the election and instead actually starts communicating within itself.  Tell me why folks line up at the polls to support progressive candidates for the next senate elections in 2010.  Tell me why they will show up in 2016 with the same passion they displayed in 2008.

Ok, this year the experts will marvel that there was a sleeping giant in NC, GA, and inumerable other states that Obama "discovered". 

Fine- indulge in the hero worship, go for the ratings, but for gods sake, ask some questions.  Will they go back to sleep?  What actions could be taken to put them back to sleep? 

This won't be over on Nov. 5th.  It is just the beginning of the beginnning.

As a matter routine, the FBI is required to be involved to monitor procedures when there is a bank merger or acquisition.  Only the FBI has the qualified manpower, competence in technology and intimate knowledge of financial procedure and banking law to reliably montor such transitions.  The egregious bending of rules and common sense during the recent financial collapse makes one wonder whether this shickanery would have been going on if the FBI was looking over the shoulders of bond rating agencies, the mortgage agents, and the firms that concocted flimsy securites out of debt assets.  It is without question that the country has suffered hundreds of billions of dollars of real losses, and trillions in asset losses due to wrong doing- whether criminal or bending existing banking regulations in the finance markets.  The entire budget of the FBI is about 6.5 billion dollars.

In terms of national security issues, technological sophistication and investigative rigor required, whatever regulation and monitoring agency is established, it will have to be essentially a mirror in capability of the FBI.  So the immediate question is- why duplicate the FBI?

Why not grow the FBI, and put special agents in charge of monitoring Wall street activities like traffic cops watch highways.  Granted, it is unprecedented to apply criminal techniques to the enforcement of federal banking regulations.  It's not like this is beneath the FBI though.  After all, these aren't "just" regulations- they are designed to protect the economic security of the nation- at a dollar figure that dwarves losses due to criminal activity.

Still hearing a huge lack of imagination on the Stimulus packages being considered.

One proposal for a stimulus package is to pay people to take training in green jobs- installing solar panels, insulation and other "negawatt" drilling- Generating new energy by slowing the massive energy waste that most folks don't even notice.

There is a demand driven approach, and was used very successfully in Germany.  The idea was that entrepeneurs will beat a path to your door if they see a profit in it.  Contractors don't need to be told how to get training for a skill they need.  If they see huge dollar signs from installing wind turbines and solar panels for businesses- by golly they will figure out how to get into that racket. 

What Germany did was guarantee that electricity would be purchased at a high enough price that they could make money like crazy, and banks would quickly approve loans for the panels/ wind turbines. 

Under this scheme, the incentive program would provide federal low interest loans for alternative energy systems, mandate that all utilities must buy excess energy from homes and businesses, and set a minimum rate that they must be paid. 

There would be a resulting boom in construction spread everywhere in the US.  Unlike other mega projects such as the National Energy Transmission Grid, or federal guarantee of loans for solar and wind farms, this stimulus would reach everywhere in America.  Note that Germany has the higher penetration of solar than the US, and they on average receive less sun than Anchorage, Alaska.

There was a great deal of doubt that Bush would sign the fiscal stimulus bill that Pelosi has been advocating for a lame duck session of congress. 

That is, until today.

Federal Reserve chairman Ben Bernanke advocated today an additional immediate stimulus package, and the white house indicated its openness to a stimulus.

As Nobel Prize winning economist Paul Krugman pointed out in his NY Times opinion piece last Friday, any stimulus package should include infrastructure spending.  The usual argument against infrastructure spending is that by the time construction starts, the slump has past.  Not this time.  Krugman points out that all indications are that the slump will be prolonged and that substantial government spending on infrastructure will provide sustained stimulus to the economy. 

Earlier this week I advocated spending on a national grid for bulk transmission of electricity.  Yet there is spending on Green Stimulus that can be achieved much more rapidly.  There is a huge need for training and paying people to take such courses could be done almost immediately.  Skills needed cover a broad range from energy conservation to transmission and generation system installation.  For example, there aren't enough skilled installers of solar panels for electricity and hot water.  Photo voltaic system installation requires a superset of skills beyond what a licensed electrian understands.   Regarding transmission- the national High Voltage DC electricity network will be a coast to coast web of lines requiring substantially more lineman and high voltage power construction crews than the nation currently has.  Unemployed construction workers should be attending schools on the skills needed for retrofitting buildings to substantially reduce energy utilization.

So training can be rolled out immediately.  Students would be paid to attend the courses, and that alleviate load on unemployment benefits currently weighing on the states.  The second part of the stimulus would be authorization of projects- offering low cost loans to build solar panel factories, and contracts for large numbers of panels.  These would be offered to homeowners as something that is paid back via their electrical bill- they pay their electrical bill as they always do, but all electricity generated from the panels goes to pay them off.  In 10 to 15 years depending on how heavily sunlight hits their corner of the country, the panels would be paid off.

Installing this number of panels will require a large workforce of installers, and large numbers of PV factories.  However factories can be built in 6 months- about the time it will take to get enough trained installers in place.  Because usage of solar at the home and business does not require the national transmission network, there is no need to wait for the national infrastructure to come on line.

If $4 gasoline makes people get rational about energy independence (article), then do we all go back to snorting heroin again now that gasoline has dipped below $2.99?

It's the old amnesia again, and the incentives to become independent of foreign energy have disappeared.

By late 2010, America will be able to mass produce electric vehicles that are competitive if gasoline costs $3.50.   We need to phase in a price signal to direct the markets to a sane outcome.  We need to use game theory to tilt the playing field so that markets innovate in directions that benefit our national security interests in energy independence.

What Congress must do is give the Federal Energy Regulatory Commission the authority regulate the price of gas through taxes so that gasoline is at a price floor of $3.50 by late 2010.  Revenues collected will not go into the general treasury, but shall be applied by the FERC to apply to subsidies for qualifying alternative fuel vehicles such as using electric and fuel cell. 

Just as Congress cannot be entrusted with the authority to regulate monetary supply by legislating interest rates, Congress must cede authority over gasoline price regulation to an agency with the independence of the Federal Reserve.  It must have its own cash flow independent of the national treasury, and its commissioners must have long terms similar to those for the Federal reserve governors.  This approach was suggested by Tom Daschle in answer to a comprehensive health care solution.  The approach should be applied to energy policy.

When the republicans nominated Palin, I told my friends that it would be huge for campaign contributions, and she would be the gift that kept on giving. 

September's Contributions bore that out.  (ABC story here)

This is a huge huge club, not just in advertising, but for the ground operations.  Go team Go.

There is a chicken egg problem with energy independence.  There are vast energy sources from wind, solar, and wave located in states that are distant from energy consumers.  No one wants to invest in building generation if there is no way to transmit the electricity in bulk to customers in distant locations.  No one wants to build the transmission without the generation capacity that could utilize it.

With the Fed having expended nearly all its bullets in the form of rate cuts, all eyes are on Congress to for a massive fiscal stimulus that would inject $300 billion into the economy so that we will not slip into a deep depression that will cost the country trillions in lost GDP.  Lots of ideas on how to blow that much money.  Lets take a moment and think about actually getting something back for our money.  Rather than pay the money out as tax rebates (why send the money back via Wallmart to China?), we could pay for a national electricity transmission grid capable of moving electricity in bulk from coast to coast.  The project would be massive, along the lines of Eisenhower's construction of the national system of freeways.  Large number of construction, steelworkers, and linemen will be required.

The benefits are multiple.  This is not a make work project- we clearly all understand by now that relying on our own energy means we will stop hemorrhaging money to pay for energy from outside the US. 

More importantly, the project will pay for itself.  By surcharging electricity transmitted on this national grid, the system will be made to pay for itself within a decade.  That means 300 billion need not be added to the national debt. 

The requirements for building the massive number of towers- the steel and aluminum cabling required will require a Herculean effort from our industry.  It will generate a million jobs short term. 

After the November election, let's put Congress back to work and ramrod through a bill to build the  National Electrical Transmission Grid.

Included must not just be authorization for the money, but authorize the federal project to override the authority of state and regional agencies to hamstring or otherwise delay the project.  This is an interstate commerce issue with economic recovery and national security implications.  Nothing must be allowed to stand in its way.

Department of Energy (CERTS) report "Our National Transmission System Today and Tomorrow"

Cleveland.com article "Transmission grid limits wind power's potential"

The republicans have been attempting to cast Obama as the one who wants to redistribute wealth.

The fact of the matter is that there has been a massive redistribution of wealth in the United states to the richest in America.

Here are the facts:

Since Reagan's election (from 1980 to 2005) the top tenth of the poplations share of all taxable income went from 34 percent to 46 percent.  The changing distribution within the top 10 percent, however is what's truly remarkable.  The unlucky folks in the 90th to the 95th percentiles actually lost a little ground, while those in the 95th to 99th gained a little.  Overall, however, income shares in the 90th to 99th percentile population were basically flat. (24 percent in 1980 and 26 percent in 2005). 

Almost all the top one-tenth's share gains, in other words, went to the top 1 percent, or the top centile, who doubled their share of the national cash income from 9 percent to 19 percent.  Even within the top centile, however, the distribution of gains was radically skewed.  Nearly 60 percent of it went to the top tenth of 1 percent of the population, and more than a fourth of it to the top one-hundredth of 1 percent of the population.

Overall, the top tenth of 1 percent more than tripled their share of cash income to about 9 percent, while the top one hundreth of 1 percent, or fewer than 15,000 taxpayers, quadrupled their share to 3.6 percent of all taxable income.  Among those 15,000, the average tax return reported $26 million of income in 2005, while the take for the enire group was $384 billion.

McCain is correct to criticize redistribution of wealth.  It is unfair and against American ideals of fair play, and an honest dollar for honest work.  What McCain doesn't get is that the wealth distribution that has been going on heavily favors the super rich and is a direct result of the economic policies that he has defended for his entire career in government.

Source: The Trillion Dollar Meltdown, by Charles R. Morris, Chapter 7.

What we have to realize was that the US economy was based on unsustainable consumer buying binges utilizing dramatic home price appreciation and very easy credit.  Our economic activity was higher than we can support in normal conditions.

Here is the key point- even if home prices were level, and credit availability was at a normal level, we would have too many stores and too many businesses than our economic activity can support.

Needless to say, conditions are not neutral but negative.  Home prices are in a death spiral and credit is so tight that the state of California can't get a line of credit to make its payroll.  Aggressive action of injecting capital into major banks being taken in Germany in the UK, to be followed in the US are being recieved in the markets very well this (Monday) morning. 

The longer term issue is how to make sure that the recession will not be deep and sustained. 

Stimulus in job creation is possible, and not just in construction repairing infrastructure.  Currently, we have no way of transmitting large amounts of energy to our coastal cities from future electricty generation in great plains wind farms and desert states' solar farms.  This new grid, researched by the DOE is an enormous undertaking.  As for power generation, while availability of turbines is a bottleneck placing an upper limit on growth of wind and wave power, the same is not true of solar PV.  Multiple US corporations have cookie cutter assembly lines that they can build to quickly ramp up production.  Enormous production capacity could be online within a year employing tens of thousands of workers.  Massive solar farms can be built in 6 month time frames compared to decade long schedules required for nuclear.   And not only large companies but small businesses can compete equally by installing Photovoltaic panels on business warehouse rooftops as well as homes.

The armies of workerers needed for this massive energy independence program will be paid by the 700 billion we will not be sending oversees for oil.  The switchover of our oil burning car fleet will not take place overnight, but General Motors has technology that all American car companies should be using to rapidly switch over production to electric powered cars by 2010.  This will require capital injection into Ford, GM and Chrysler, but the alternative is to allow one or more of these companies to fail resulting in the loss of millions of jobs.

The republicans will resist these massive interventions in the US economy, but without an aggressive response to generating jobs, America may well suffer the kind of two decade economic stagnation that Japan suffered after its credit asset bubble popped.

The Reconstruction Finance Corporation was created by the federal government to make direct loans to business during the Great Depression. 

Since banks are unwilling to make loans needed by businesses for their day to day activities and the credit markets are so seized up that even the State of California cannot get short term credit needed to make its payroll, we need to act immediately.

President Elect Obama needs to work with the outgoing administration to immediately re-establish the RFC during this crisis and make Warren Buffet its head.  His no nonsense approach to identifying value will make him the best steward of 100s of billion of federal money loaned to businesses. 

Paul Volker, the only Monetary Policy giant left standing, endorsed this plan last night on Charlie Rose (10/9-  The RFC idea came up on the 10/1/08 show).

It's time to act before this financial contagion destroys the real economy and we enter a death spiral of unemployment, constricted consumption, and as a result further business closures.

It's tough not to notice how the markets seem to be in a death spiral sweeping aside the 700 Billion bailout and the half point coordinated cut in interest rates as if they the efforts of infants.

Forget about McCain's Economic proposal of the hour- Paulson surprizingly signalled today that the US may well follow the UK lead and take the option that Congress gave but that he said at the time that he didn't want.

Forget about reverse auctions and buying up the bad debt.  The US is going to buy shares of the banks and start injecting capital like crazy to head off a world economic collapse of a magnitude greater than that of the depression.  Ironically, Lehman was allowed to fail as a last affirmation that market fundamentalism would solve this.  It may have proven to have been the trigger of the rapid collapse of what Soros called the "Super Bubble" in his last book.  (The New Paradigm for Financial Markets: The Credit Crisis of 2008)

Start learning to grow food in the back yard folks.  It will be a long long time before we are back to where we were just 4 weeks ago. 

If this dire picture is correct, then President Obama is going to have to pour in a lot more than 15 billion into his green jobs initiative in his first term.  This is going to require massive public works projects to get people back to work if direct capital injection fails to turn this crisis around. 

It is a miraculous challenge for the nation- the impetus for the World War II level of effort to get the nation off of fossil fuels in the next decade.  Before this, it was hard to see how the nation would accept the need for such sacrifice.  Now it may have come.  It is a miracle.  We have the leader, and we have the crisis necessary to galvanize a nation. 

 Let's get to work.

Paul Krugman's Op Ed : Moment of Truth

Commentary: Is this the start of another Great Depression?  UCB economist and historian of the Great Depression