Da Econ

UMKC SDI 2008 LouGie’s

Economy Disadvantage

Economy Disadvantage Economy Disadvantage...................................................................................................................................................1 ***1nc’s***....................................................................................................................................................................4 Economy 1nc...................................................................................................................................................................5 Economy 1nc...................................................................................................................................................................6 Budget 1nc (Emissions)..................................................................................................................................................7 Budget 1nc (Emissions)..................................................................................................................................................8 Regulations 1nc...............................................................................................................................................................9 Regulations 1nc.............................................................................................................................................................10 Business Confidence 1nc..............................................................................................................................................11 ***Uniqueness***........................................................................................................................................................12 Economy Up.................................................................................................................................................................13 Economy Up.................................................................................................................................................................14 Economy Up.................................................................................................................................................................15 Economy Up: Rebounding............................................................................................................................................16 Business Confidence High............................................................................................................................................17 A2: No Recessions........................................................................................................................................................18 ***Uniqueness: Sectors***..........................................................................................................................................19 Energy Prices High.......................................................................................................................................................20 Gas Prices High.............................................................................................................................................................21 Oil Prices High..............................................................................................................................................................22 Oil Prices Down............................................................................................................................................................23 ***Links***..................................................................................................................................................................25 New Energy Policies.....................................................................................................................................................26 Energy Efficiency..........................................................................................................................................................27 Energy Efficiency Hurts Small Businesses...................................................................................................................28 Carbon Tax....................................................................................................................................................................29 Coal Links.....................................................................................................................................................................30 Cap and Trade Hurts Economy.....................................................................................................................................31 Cap and Trade Hurts Competitiveness..........................................................................................................................32 Cap and Trade Hurts Consumers..................................................................................................................................33 Tradable Permits Hurt the Economy.............................................................................................................................34 Tradable Permits Hurt Small Business..........................................................................................................................35 Subsidies Hurt the Economy.........................................................................................................................................36 Banning Fossil Fuels Hurts the Economy.....................................................................................................................37 Ethanol Regulations Hurt Economy.............................................................................................................................38 Stopping Warming Hurts the Economy........................................................................................................................39 Stopping Warming Hurts the Economy........................................................................................................................40 ***Budget***...............................................................................................................................................................41 CAFÉ Link....................................................................................................................................................................42 RPS Links.....................................................................................................................................................................43 Nuclear Power Links.....................................................................................................................................................44 Regulation Links...........................................................................................................................................................45 Emissions Links............................................................................................................................................................46 ***Regulations***........................................................................................................................................................47 Regulations....................................................................................................................................................................48 Regulations Hurt Small Business..................................................................................................................................49 Regulations Hurt Consumers........................................................................................................................................50 Regulations Snowball...................................................................................................................................................51 Steel 2nc........................................................................................................................................................................52 Steel Key Economy.......................................................................................................................................................53 Steel Impacts: Military..................................................................................................................................................54 Steel Impacts: Environment..........................................................................................................................................55 Agriculture 2nc.............................................................................................................................................................56 Exports Key US Agriculture.........................................................................................................................................57 Agriculture Key Economy............................................................................................................................................58 1

UMKC SDI 2008 LouGie’s

Economy Disadvantage

Food Price Impacts........................................................................................................................................................59 ***Café Links***.........................................................................................................................................................60 Café Hurts Economy.....................................................................................................................................................61 CAFÉ Hurt Competitiveness........................................................................................................................................62 CAFÉ Hurt Consumers.................................................................................................................................................63 CAFE Hurt Consumers.................................................................................................................................................64 CAFÉ Hurts Small Business.........................................................................................................................................65 CAFÉ Hurt Auto Industry.............................................................................................................................................66 CAFÉ Hurt Auto Industry.............................................................................................................................................67 CAFÉ Hurts Auto Industry: Transition Cost.................................................................................................................68 CAFÉ Hurts Auto Industry: Competitiveness...............................................................................................................69 ***Internals***.............................................................................................................................................................70 Jobs Key Economy........................................................................................................................................................71 Small Businesses Key Economy...................................................................................................................................72 Small Business Key Economy......................................................................................................................................73 Consumer Confidence Key Economy...........................................................................................................................74 Business Confidence Key Economy: Stops Recession.................................................................................................75 Business Confidence Key Economy: Generic..............................................................................................................76 Business Confidence Key Global Economy.................................................................................................................77 US Key Global Economy..............................................................................................................................................78 US Key Global Economy..............................................................................................................................................79 US Key Global Economy..............................................................................................................................................80 ***Sector Internals***.................................................................................................................................................81 Energy Key Economy...................................................................................................................................................82 Coal Key to the Economy.............................................................................................................................................83 Natural Gas Key Economy...........................................................................................................................................84 Electricity Key to the Economy....................................................................................................................................85 Electricity Infrastructure Key Economy.......................................................................................................................86 Auto Industry Key Economy........................................................................................................................................87 ***A2: Renewables Turn***........................................................................................................................................88 Renewables Do Not Matter...........................................................................................................................................89 Renewables Transition Blocks Economics...................................................................................................................90 Renewables Crush Business Confidence......................................................................................................................91 Renewables Transitions Expensive...............................................................................................................................92 Renewables Can’t Fix Current Economic Problems.....................................................................................................93 Renewables Raise Energy Prices..................................................................................................................................94 Renewables Will Never Be Competitive.......................................................................................................................95 Solar Power Hurts the Economy...................................................................................................................................96 Wind Power Hurts the Economy...................................................................................................................................97 Hydrogen Hurts Competitiveness.................................................................................................................................98 ***Answers to Answers***..........................................................................................................................................99 A2: Economy Resilient ..............................................................................................................................................100 A2: Recession Not Cause Depression.........................................................................................................................101 A2: Economic Checks.................................................................................................................................................102 ***Impacts***............................................................................................................................................................103 Economy First.............................................................................................................................................................104 Global Economy Impacts (Mead)...............................................................................................................................105 U.S. Collapse Sparks U.S.-China War (Mead)...........................................................................................................106 US Credit Liquidation (Bailey)...................................................................................................................................107 Global Economy Impacts (Lopez)..............................................................................................................................108 Global Economy Impacts (Lewis)..............................................................................................................................109 Economic Decline Impacts..........................................................................................................................................110 Stock Market Collapse Impacts...................................................................................................................................111 Unemployment Impacts..............................................................................................................................................112 Economy Key Hegemony...........................................................................................................................................113 Economy Key Elections..............................................................................................................................................114 ***Affirmative Answers***.......................................................................................................................................115 2

UMKC SDI 2008 LouGie’s

Economy Disadvantage

N/U- Alternative Energy Now.....................................................................................................................................116 Economy Down: Housing Market...............................................................................................................................117 Economy Down: Generic............................................................................................................................................118 Dollar Down................................................................................................................................................................119 Business Confidence Down........................................................................................................................................120 Business Confidence Low...........................................................................................................................................121 Global Economy Down...............................................................................................................................................122 N/L- Incentives Popular..............................................................................................................................................123 Link Turns: Alternative Energy...................................................................................................................................124 Link Turns: Climate Regulations................................................................................................................................125 No Economic Collapse................................................................................................................................................126 Economy Resilient......................................................................................................................................................127 A2: Recessions............................................................................................................................................................128 Recessions Good.........................................................................................................................................................129 Recessions Good.........................................................................................................................................................130

3

UMKC SDI 2008 LouGie’s

Economy Disadvantage

***1nc’s***

4

UMKC SDI 2008 LouGie’s

Economy Disadvantage

Economy 1nc The U.S. economy is set to rebound and have growth in 2009, and new change will crush investment and confidence derailing the economy Vikas Bajaj 7/1/2008 “At Midyear, the Economic Pain Persists”, New York Times, http://www.nytimes.com/2008/07/01/business/01place.html?em&ex=1215057600&en=6cc470e7cba33e7c&ei=5087 %0A Many policy makers and bankers said this credit mess was contained. Boy, were they wrong. More than a year after the crisis first flared, the financial industry, and with it the broader economy, seems to be caught in a vicious circle. As home prices sink, people are falling behind on their mortgages in growing numbers. As more homeowners run into trouble, banks must write off even more loans. And as the bad loans mount, financial companies are increasingly unable or unwilling to extend credit, making it even harder to buy homes or expand businesses. This process is playing out painfully on Wall Street, where on Monday the stock market rounded out its worst 12-month run since the spring of 2003, when the United States invaded Iraq and the market was beginning a tenuous recovery from the bursting of the technology bubble. The Standard & Poor’s 500-stock index is down 12.8 percent for the first half of the year. The index just had its worst June (down 8.6 percent) since 1930 (down 16.5 percent). The Dow Jones industrial average is off 14.4 percent for the first half of the year. Financial shares keep falling. Even as the broader market posted a small gain on Monday, shares of banks and brokerage firms in the S.& P. 500 fell 2.1 percent, to a five-year low. Lehman Brothers, which has been struggling to persuade investors that it can survive as an independent firm, fell 11 percent Monday, bringing its loss for the year to nearly 70 percent. “Eventually, the financial sector’s troubles will be communicated to the rest of the economy,” said Douglas M. Peta, market strategist at J.& W. Seligman and Company in New York. “As there is less investment available that restrains consumer spending, it restrains corporate spending.” One measure already signals that the woes of the financial system are straining the economy. In the last 13 weeks, total bank loans, leases and securities holdings have fallen at an annual rate of 9.1 percent, its fastest decline since 1973, when the data was first collected, according to Jan Hatzius, chief domestic economist at Goldman Sachs. Even as the Federal Reserve and the government have tried to reinvigorate the economy with lower short-term interest rates and tax rebates, rates on mortgages and corporate loans have climbed to their highest levels this year. The average interest rate on a 30-year fixed rate home loan was 6.45 percent last week, up from 6 percent at the start of the year. Investment-grade corporate bonds are yielding 6.2 percent, up from 5.7 percent at the start of the year. Until recently, “we haven’t had the sense that we had the downward spiral in anything other than housing,” said Jane Caron, chief economic strategist at Dwight Asset Management, a bond-trading firm based in Burlington, Vt. “What I am worried about is that we are headed in a direction where those negative feedback loops expand and intensify.” That cycle will not be broken, Ms. Caron and other analysts say, until the decline in home prices slows significantly or ends, allowing the market to tally the full cost of the recent credit binge and restoring confidence among bankers and investors. Some analysts see tentative signs that the fall in housing may be ebbing. Sales of existing homes have flattened in recent months and home prices fell a little less in April than they did in March on a monthover-month basis. But both trends could easily reverse, as they have after previous upswings. “We could reach a bottom in housing at the end of this year and have some growth in the second half of 2009,” Ms. Caron said, “but that requires the economic backdrop to remain no worse than it currently is.”

Unpredictable policy changes ruin confidence and deter investment. *Gender Paraphrased* PR Newswire November 15 1993 "Predictability

is the mother of confidence, and we want government to provide a steady, growing economic environment in which we can develop our businesses with that confidence," the CBI conference in Harrogate was told today (Monday) by Clive Thompson, chairman of the SE Region and group chief executive of the Rentokil Group. He added: "We in the CBI are no longer on the outside looking in - we're right on the inside. But being on the inside demands we express our views responsibly and completely. It is insufficient to put the business view in isolation without thought or concern for the requirements of the other parts of the economy. "We cannot ignore the demands of health, education, social services and transport on the public purse. Clearly, tax revenue directed towards business means less resources for other important requirements in the economy. Recognition brings responsibility." He went on to advocate government focusing on creating an environment in which business could create success. "We don't want radical changes of policy and direction much loved by politicians. Peaks and troughs have done more to wipe out the confidence so necessary for investment in research and development, speculative new projects, and investment in plant and machinery than any misguided political dogma. "Business[people]men invest in their businesses and take risks in new ventures if they believe they will be

working in a business friendly environment. Confidence is the key, and for those who have to invest in the future, predictability is the mother of that confidence."

5

UMKC SDI 2008 LouGie’s

Economy Disadvantage

Economy 1nc Even small regulations spillover and devastate the economy Thomas G. Marx (manager in the Public Policy Center for the Global Climate Issue for General Motors Corp) July 1999 The Role of Technology In Responding to Concerns About Global Climate Change, www.accf.org/marx.pdf, While manufacturing’s dominance of total energy use suggests a reason to focus on that subsector of industry, it is important to note that energy and technology policies directed at one area could have a spillover effect that negatively affects other lower energy-consuming subsectors. While some industries may not consume as much energy or emit as much carbon, policies affecting energy prices and availability may have a disproportionately large effect on them. Some of these smaller energy users can be significant players in economic terms. Thus, well-meaning energy policies with potentially modest economic impacts in one industrial area could have unintended devastating economic impacts in another. The potential for crosssectoral problems and the difficulty in easily identifying them is inherent in the complexity of the industrial sector.

Global economic decline will bring Armageddon. Lt. Col Tom Bearden (PhD Nuclear Engineering) April 25 2000 http://www.cheniere.org/correspondence/042500%20-%20modified.htm Just prior to the terrible collapse of the World economy, with the crumbling well underway and rising, it is inevitable that some of the weapons of mass destruction will be used by one or more nations on others. An interesting result then---as all the old strategic studies used to show---is that everyone will fire everything as fast as possible against their perceived enemies. The reason is simple: When the mass destruction weapons are unleashed at all, the only chance a nation has to survive is to desperately try to destroy its perceived enemies before they destroy it. So there will erupt a spasmodic unleashing of the long range missiles, nuclear arsenals, and biological warfare arsenals of the nations as they feel the economic collapse, poverty, death, misery, etc. a bit earlier. The ensuing holocaust is certain to immediately draw in the major nations also, and literally a hell on earth will result. In short, we will get the great Armageddon we have been fearing since the advent of the nuclear genie. Right now, my personal estimate is that we have about a 99% chance of that scenario or some modified version of it, resulting.

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UMKC SDI 2008 LouGie’s

Economy Disadvantage

Budget 1nc (Emissions) Fiscal discipline is strong now. The plan sends a shock to the GOP that kills discipline. Sarasota Herald-Tribune 3/1/2008 President Bush

and his allies in Congress may finally reacquaint themselves with their self-proclaimed roots as "fiscal conservatives." Now that they've amassed a record federal deficit of $421 billion in the last four years, they appear ready to exercise more restraint. According to reports by The Wall Street Journal and others, White House officials are talking about presenting a budget in February that will call for a spending freeze for almost all programs not linked to defense and homeland security. The plan is designed to meet a goal of cutting the deficit in half by the end of Bush's second term. Many Republicans in Washington are quick to point out that they've faced special challenges the last few years, including terrorism costs, that have caused the deficit to balloon. But -- excluding homeland security and disaster aid -- domestic spending has grown by 27 percent since Bush moved into the White House, according to The Washington Post. As Journal reporter Jackie Calmes recently noted, "for all of their antispending rhetoric, " the president and his GOP allies in Congress "have shown themselves to have big appetites for splurging on matters such as roads, farms, education and business subsidies." Some of those expenditures were, of course, critical and had bipartisan support. But as the president and Congress move forward with efforts to reduce the deficit, they should make sure that they explore every available alternative to reducing or freezing spending for essential services. First, lawmakers -- many of whom will undoubtedly be eyeing midterm re-election campaigns -- should resist the urge to lower taxes further. Such a plan might win votes, but the cut-taxes-and-spend-wildly mentality of the past four years has left the nation in a financial mess. Congress also must restrain itself from further subsidizing business in the name of "job creation." Many of the tax breaks approved in recent months were corporate handouts given without assurances that new employment would result. Instead of providing corporate welfare, lawmakers should to give the Internal Revenue Service sufficient resources to ensure that the government is recovering all the taxes owed by corporations, which, among other maneuvers, set up shell companies in other countries to dodge obligations here. And Congress should go on a pork hunt. Every year, Congress allows members to insert a long list of pet projects into massive appropriations packages. As Sen. John McCain, R-Ariz., and others point out, these projects aren't reviewed by government agencies for need or effectiveness -- or, in many cases, even discussed by lawmakers. It's a wasteful tradition that's in dire need of reform. Reducing the deficit certainly won't be painless or free of controversy. But if Republicans -- and Democrats -- hope to win public support for

program freezes or cuts, they need to show that they're serious about freezing and cutting irresponsible policies and practices that have contributed to our huge deficit.

Mandated cuts in emissions devastates the federal budget. Margo Thorning (American Council for Capital Formation Senior Vice President and Chief Economist, Ph.D) March 30 2000 “The Impact of the Kyoto Protocol On Economic Growth: Tax Policies to Promote Technology and Sequestration”, http://www.accf.org/pdf/ThorningTestimony.pdf In light of the current debate about how to use the projected federal budget surpluses, policymakers need to consider the potentially large negative impact on GDP growth and federal budget receipts of proposals that address the possible threat of global warming by requiring sharp, near-term cutbacks in CO2 emissions. As described above, estimates provided by various academic, private-sector, and EIA modelers show that requiring the United States to reduce CO2 emissions to 7 percent below 1990 levels by 2008–2012 (the EIA projects U.S. CO2 emissions will be about 40 percent above this target by 2010) would reduce GDP growth in the range of 1 to 4 percent per year. Using a simple calculation based on the relationship of increases in GDP to federal tax receipts, if growth falls by 3 percent per year, the projected on-budget surplus in 2010 would decline from $195 billion to $57 billion (see Figure 3). Therefore, implementation of the Kyoto Protocol would make it much more difficult to sustain tax cuts, “save” Social Security, or promote the retirement security of the baby boom generation, and could require sharp changes in fiscal policy in order to avoid deficit spending. These budgetary impacts should be considered as policymakers shape the U.S. response to the potential threat of climate change.

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UMKC SDI 2008 LouGie’s

Economy Disadvantage

Budget 1nc (Emissions) Without reigning in spending, the dollar will spiral out of control and investors will stop financing the US debt, leading to a disastrous economic decline. The Washington Times December 8 2004 Foreign investors, who have been the biggest buyers of our debt, are losing trust in the integrity of our fiscal policy. They see the U.S. budget process as virtually out of control. They see us running the largest current account deficit of all time. In response, they have begun selling the dollar and shifting their money elsewhere, with potentially devastating effects for American investors. To head off a crisis and restore trust in America's finances, a first step is return to a complete "pay as you go" budget process which will keep the budget hole from getting any deeper. This would reassure foreign and domestic investors and help prevent further damage. Under our current system, Congress can spend all it wants with no immediate consequences. Only last month, Congress passed a $388 billion appropriations bill and increased the debt limit by $800 billion, meaning the federal government can now borrow up to $8.2 trillion with no plan for repaying it. It seems clear the federal budget process is largely broken, but Congress continues record spending on the cuff. In contrast, with honest pay-as-you-go accounting in the budget process, also known as "pay-go," every time the government proposes spending more money or cutting more income, it would have to find equivalent savings or revenues in the budget to finance the proposals. This is both fair and non-partisan. Reasonable, responsible members on both sides of the aisle understand honest budgeting is good for America, no matter who is in charge. It was originally instituted in 1990 under George H.W. Bush and helped achieve the fiscal responsibility and budget surpluses under both Republican and Democratic administrations. It worked then. It can work again. But time is short. The dollar has already fallen to a 4 1/2-year low against the Japanese yen, an 8-year low against a basket of currencies and an all-time low against the euro. Foreign investors have already reduced sharply their purchases of U.S. government securities and are now net sellers of U.S. stocks. Next, U.S. investors, seeking to avoid losses, may do the same. To stabilize the dollar for the long term and protect our country's financial future, Congress and

the administration must move swiftly to prevent further deficit deterioration. They must account for all their spending, whether on tax cuts, more programs or expanded entitlements. The dollar's decline is not some distant crisis on the far horizon. It is here and now. Indeed, investors don't have to wait until the next election to protest the federal government's runaway deficit spending policies that are endangering their investments. Nor need they go to Washington and pound on decision-makers' desks. They only have to pick up the phone or click on a mouse and issue one four-letter command: "Sell." That single act can send a very strong message to the White House and Congress: "Unless you change your ways, we won't buy your dollars, and we won't buy your bonds. We may even turn net sellers." Let's hope the government gets its house in order with no massive financial crisis. But without swift and responsible leadership from Congress and the president, it soon may be too late to prevent the most dangerous decline in decades.

Global economic decline will bring Armageddon. Lt. Col Tom Bearden (PhD Nuclear Engineering) April 25 2000 http://www.cheniere.org/correspondence/042500%20-%20modified.htm Just prior to the terrible collapse of the World economy, with the crumbling well underway and rising, it is inevitable that some of the weapons of mass destruction will be used by one or more nations on others. An interesting result then---as all the old strategic studies used to show---is that everyone will fire everything as fast as possible against their perceived enemies. The reason is simple: When the mass destruction weapons are unleashed at all, the only chance a nation has to survive is to desperately try to destroy its perceived enemies before they destroy it. So there will erupt a spasmodic unleashing of the long range missiles, nuclear arsenals, and biological warfare arsenals of the nations as they feel the economic collapse, poverty, death, misery, etc. a bit earlier. The ensuing holocaust is certain to immediately draw in the major nations also, and literally a hell on earth will result. In short, we will get the great Armageddon we have been fearing since the advent of the nuclear genie. Right now, my personal estimate is that we have about a 99% chance of that scenario or some modified version of it, resulting.

8

UMKC SDI 2008 LouGie’s

Economy Disadvantage

Regulations 1nc US economy bouncing back—it is now growing at sustainable pace The Australian Business News 6/16/2008 “Slowdown in two sectors does not make a US recession”, http://www.theaustralian.news.com.au/story/0,25197,23871486-23850,00.html What, then, is the evidence of America moving into recession? Looking at the statistics used by the NBER, there is little or none - at least so far. GDP has continued to grow, albeit slowly, in the past two quarters and almost certainly will accelerate in the current quarter because of booming exports; industrial production has been positive, as have real income and whole-retail trade. Employment has fallen slightly, but by nowhere near as much as in the mildest of past recessions. Reliable high-frequency indicators, such as the monthly purchasing managers' surveys, point to continuation of modest growth. Most importantly, consumer spending has remained robust. American consumers, far from cutting back to bare essentials, as was expected by bearish commentators after the credit crunch, are actually increasing their spending. The evidence of this, contained in the strong retail sales figures for May published last Thursday, was by far the most important economic news of the past few weeks. But these figures received almost no media coverage and little market attention. Further, May's retail sales figures revealed a picture completely at odds with conventional wisdom about the US economy. Despite the jump in energy prices and the related collapse in measures of consumer confidence, retail sales rose by 1.1 per cent on the month, the strongest gain since last November. Sales adjusted for inflation and excluding food and energy also showed gains much stronger than expected. Also, April's sales, initially thought to have fallen, were revised upwards to show a significant gain - and the two-month average of these volatile figures suggested that growth in the US consumer economy is now similar to the rate a year ago, before the sub-prime crisis and credit crunch. This conclusion is not based on one set of good retail sales statistics, but includes stronger than expected recent figures on industry sales, stocks, imports, exports, purchasing managers' surveys and even home sales. But in saying this, am I not forgetting about the dreadful employment figures published last Friday, which triggered the collapse of the US dollar I mentioned at the start? Not at all. Despite the shock-horror headlines about a terrifying leap in unemployment from 5 to 5.5 per cent, employment figures for May were quite strong and fully consistent with the message of economic acceleration. Rates of unemployment are irrelevant in timing the economic cycle, since they are a lagging indicator, turning some six-to-nine months after the economy as a whole. Meanwhile, the job creation figures, which do reflect current economic conditions, showed a modest decline of 49,000 in payroll employment, exactly in line with expectations and consistent with the economy growing at about 1.5 per cent, just slightly below the 2 per cent trend rate of productivity growth. Of course, May's strong retail sales were due in part to the tax rebates of $US600-2000 per household from the US Treasury from last month. Many analysts, therefore, dismissed the gains as misleading. But this was the wrong response. The role of tax cuts in boosting consumer spending is a reason for optimism, not scepticism, about the economic outlook. The tax rebates were designed to boost consumer spending and that is why we have always expected (in line with the Fed and the US Treasury) to see economic recovery from this summer. Retail sales figures have now shown that the US tax cuts are working as planned. They will temporarily boost

consumption - and by the time that this temporary tax boost runs out around Christmas, the US economy will be starting to enjoy the benefits of lower interest rates, operating with a lag of 12-18 months. In much of this discussion, my optimism on US economic statistics has been qualified by the weasel words “so far”. But this can change. Until this month, sceptics could predict that trouble lay ahead for America once consumers finally realised that their credit had run out. But the strong consumer response to the $US110 billion tax rebate program changes the balance of this argument. With the rebates flowing into bank accounts and boosting real disposable incomes, the period of greatest risk for the US economy has passed. For the next two quarters, disposable incomes will rise at an annualised rate of 8 per cent or more and, given the normal lags between money appearing in bank accounts and flowing into shop tills, the tax rebates will guarantee decently strong retail spending between now and Christmas - maybe a temporary consumer boom. If there were going to be a US recession in response to the credit crisis, it would have started by now. So, let me stick my neck out and say without qualification - the US economy is out of the woods.

Energy regulations would plunge the US economy into a recession, these include carbon taxes, gas taxes, emissions regulations Modern Plastics August 1 2001 Despite the fact that the Kyoto Protocol has not been ratified by any major industrial nation (unless you count Romania), there has been renewed pressure from environmentalists, the press, and Europe for President Bush to endorse Kyoto. However, as the National Association of Manufacturers recently stated, President Bush's stance on Kyoto is right on the mark. If ratified, the treaty would have a major economic impact on the U.S. economy, especially industries such as plastics, which use large amounts of electricity to produce their products. For in order to comply with Kyoto's emission standards in the U.S., where significant steps have already been taken to curb pollution, measures such as carbon taxes on electricity and gasoline would be required to restrict the use of energy. The costs of such measures to the economy would be massive. As the U.S. Department of Energy has estimated, the costs of reducing [CO.sub.2] in the U.S. under Kyoto would be $ 300 billion to $ 400 billion, or 3 to 4% of the annual GDP. Such a great loss of GDP would most certainly plunge the U.S. into the depths of a recession. Furthermore, increased energy costs would force most plastics processors either overseas or out of business. Meanwhile, in Europe, where replacing old, inefficient power plants can make up much of the emissions reduction, and in the developing world, where no cuts will be required, the costs of production relative to the U.S. will be much lower. Although the U.S. may need to take steps to curb [CO.sub.2] emissions, Kyoto is not the answer.

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UMKC SDI 2008 LouGie’s

Economy Disadvantage

Regulations 1nc Global economic decline will bring Armageddon. Lt. Col Tom Bearden (PhD Nuclear Engineering) April 25 2000 http://www.cheniere.org/correspondence/042500%20-%20modified.htm Just prior to the terrible collapse of the World economy, with the crumbling well underway and rising, it is inevitable that some of the weapons of mass destruction will be used by one or more nations on others. An interesting result then---as all the old strategic studies used to show---is that everyone will fire everything as fast as possible against their perceived enemies. The reason is simple: When the mass destruction weapons are unleashed at all, the only chance a nation has to survive is to desperately try to destroy its perceived enemies before they destroy it. So there will erupt a spasmodic unleashing of the long range missiles, nuclear arsenals, and biological warfare arsenals of the nations as they feel the economic collapse, poverty, death, misery, etc. a bit earlier. The ensuing holocaust is certain to immediately draw in the major nations also, and literally a hell on earth will result. In short, we will get the great Armageddon we have been fearing since the advent of the nuclear genie. Right now, my personal estimate is that we have about a 99% chance of that scenario or some modified version of it, resulting.

10

UMKC SDI 2008 LouGie’s

Economy Disadvantage

Business Confidence 1nc Business confidence is high now as the economy is set to rebound Thomson Financial News Super Focus 6/24/2008 “Global risks tilted to downside, but inflation a concern”, Moody's Economy.com A deteriorating outlook and tight credit conditions continue to weigh on firms, but Moody's Economy.com weekly Survey of Business Confidence shows the mood improved markedly during May. Though sentiment across the globe remains measurably weaker than prior to the subprime financial shock last summer, rising confidence is nevertheless a positive development

Investors will perceive the plan as anti-business, crushing business confidence Mintzer Schwartz 1992 Confronting Climate Change: Risks implications and Responses, pg. 283 There are many impediments to environmental reforms but the principal obstacles, particularly in the United States are psychological and philosophical rather than economic. While European corporations tend to treat environmental regulations as a part of the operating environment, US business leaders seem to share a residual feeling that environmental regulations are part of an anti-business, anti-progress political agenda. Richard Darman, Director of the Federal Office of Management and Budget, articulated this paranoia when he argued that the goal of US policy was not to “make the world safe for green vegetable.” This prejudice—coupled with the short-term orientation of the investment community and a naturally adversarial business environment—has resulted in suspicion towards environmental issues.

Loss of investor confidence will destroy the US economy Ed Crooks (Economics Editor) July 24 2002, Financial Times Another reason to take business opinions seriously is that executives are not just forecasting economic growth but contributing to it through their investment decisions. As John Maynard Keynes put it in the General Theory back in 1936, investment decisions are based not just on rational calculation but on the "animal spirits" of investors and company chiefs. "If the animal spirits are dimmed and the spontaneous optimism falters At the World Economic Forum which was held in New York at the beginning of the year, there was a sharp contrast between the caution of most executives and the boosterism of the politicians, especially those belonging to the US administration. Six months later, the politicians' faith in the resumption of economic growth has proved justified. But the executives' downbeat tone has been a more reliable indicator of the prevailing public mood. The FT's survey of the world's leading companies, and more formal surveys of business opinion worldwide, suggest that this troubled mood will persist. It was the decline in business investment that led to last year's economic slowdown, and any strong recovery will depend on companies deciding it is time to invest again. Indeed, in the US investment is particularly significant, not just for its contribution to growth but also because it is seen as driving the faster rate of productivity growth, which seems to be one, perhaps the only, lasting positive legacy from the 1990s boom. The fear is that, if investment continues to stagnate, US productivity growth may dry up, too. If so, one of the last props supporting confidence in the US economy and markets will be kicked away.

Global economic decline will bring Armageddon. Lt. Col Tom Bearden (PhD Nuclear Engineering) April 25 2000 http://www.cheniere.org/correspondence/042500%20-%20modified.htm Just prior to the terrible collapse of the World economy, with the crumbling well underway and rising, it is inevitable that some of the weapons of mass destruction will be used by one or more nations on others. An interesting result then---as all the old strategic studies used to show---is that everyone will fire everything as fast as possible against their perceived enemies. The reason is simple: When the mass destruction weapons are unleashed at all, the only chance a nation has to survive is to desperately try to destroy its perceived enemies before they destroy it. So there will erupt a spasmodic unleashing of the long range missiles, nuclear arsenals, and biological warfare arsenals of the nations as they feel the economic collapse, poverty, death, misery, etc. a bit earlier. The ensuing holocaust is certain to immediately draw in the major nations also, and literally a hell on earth will result. In short, we will get the great Armageddon we have been fearing since the advent of the nuclear genie. Right now, my personal estimate is that we have about a 99% chance of that scenario or some modified version of it, resulting.

11

UMKC SDI 2008 LouGie’s

Economy Disadvantage

***Uniqueness***

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Economy Up 10 reasons while US economy will pick up despite any worries Dr. Robert J. Froehlich (Vice Chairman, DWS Scudder Chairman, Investor Strategy Committee) 7/14/2008 “10 Reasons Why The Bear Market Won’t Last”, http://www.kolnkgin.com/news/headlines/25426684.html Reason number 10 is “everyone is bearish.” This is pretty simple, when everyone is bullish on the market, it probably is a sign to get out and conversely, when everyone is bearish (like today), that probably is a sign to get in. Remember, nothing is ever as good as it appears, nor is it ever as bad as it seems. The markets never go up forever, nor do they go down forever. When everyone is buying, you sell. And when everyone is selling, I believe it’s a great time to buy. Number 9 - Interest Rate Cuts Reason number 9 is “interest rate cuts.” No, I am not trying to predict what the Federal Reserve Board (Fed) will do next; rather I am talking about what they have already done. Remember, when the Fed cuts interest rates, they are doing so to help stimulate the economy. And on the day the Fed cuts interest rates, here is what typically happens. Our stock markets soar, sometimes up triple digits on the Dow, while the economy yawns. The reason is our markets have the ability to react immediately, while it takes time to move our economy. It can take as long as 12 to 18 months for interest cuts to help move the economy. We still have 300 basis points of interest cuts in the pipeline that I believe will be helping our economy in the second half of the year, regardless of the Fed’s next actions. Number 8 - US Dollar Rebounds Reason number 8, the US Dollar rebounds. Think about it this way, a country’s currency is typically a reflection of its interest rate policy. If the Central Bank is raising rates, the currency is usually stronger. Conversely if the Central Bank is lowering rates, the currency is typically weaker. So why do I believe the US dollar is about to rebound? For one reason, our Central Bank, the Federal Reserve Board, has stopped cutting interest rates after 17 separate, 25 basis point cuts, or a total of 425 basis points or 4.25 percentage points. On top of that, I believe that by year-end, both the European Central Bank and the

Bank of England will be forced to lower rates as their economies and unemployment are much worse than ours, due in part to the strength of their currency which has made all of their exports more expensive. When the dollar rallies, I believe it will do wonders for consumer and investor confidence. Number 7 - Oil Stabilizes Reason number 7 is I believe that the price of oil is about to stabilize. From my perspective, I believe that global demand is finally slowing down a little. Why? Because many governments have quit or lowered their subsidies on gasoline, which have hidden and protected consumers from rising energy prices. These consumers no longer have the ability to spend other peoples’ money (the government’s) at the pump, they must spend their own. We spend other peoples’ money differently than we spend our own (more about that later). As consumers around the world use their money to pay for gas, demand is likely to go down and with it, oil. I don’t believe this is the end of the commodity bull market. From my perspective, it is simply a pause in energy commodities and especially oil. And I believe, agricultural commodities, industrial based commodities and precious metal commodities should be unaffected and continue to boom. Number 6 - Home Price Recovery Reason number 6 is home prices are poised to begin their recovery. And in my opinion, although we may not see recovery tomorrow, next week or maybe even next month, we are nearing the bottom. I believe in Bear Markets. When asset classes lose at least 20 percent, it is usually a good sign that maybe they are nearing the bottom. According to the S&P/Shiller Housing Index, over the past 12 month period, three bellwether cities posted housing price declines of over 25 percent - Miami, FL, Las Vegas, NV and Phoenix, AZ. These cities were at one time, the housing darlings and on the way up. Now, they are leading us on the way down. Remember what I said earlier, “nothing is ever as good as it appears, nor is it ever as bad as it seems. The markets never go up forever, nor do they go down forever.” And I believe, the same can be said for home prices. Number 5 - Earnings Up-tick Reason number 5, earnings up tick. As the year moves along, I believe earnings are likely to get stronger quarter by quarter. Second quarter earning’s season just began and I think it should be a good one, partly because when we compare earnings to the second quarter of 2007, I believe things will really look good. And the earnings story keeps getting better as the year goes on. From my perspective, I believe, third quarter earnings should be better than second quarter earnings. And again, I believe they will be driven by the fact that earnings comparables for third quarter 2007 were much, much worse than the second quarter. Anyway, I think you get the picture. If you lower the bar enough, anyone can jump over it. Earnings expectations and comparables are so low, that company after company and industry after industry should provide what I call an “earnings up tick.” And at the end of the day, earnings drive our markets both up and down. Number 4 - Merger & Acquisition (M&A) And Initial Public Offering (IPO) Recovery Reason number 4 is both mergers and acquisitions and initial public offerings should recover in the second half of the year. And I believe this is likely to happen for a couple of reasons. When companies are not making money, few are looking to get bigger by buying other companies. Also, why would a firm want to go public with an initial public offering, when most public firms have horrible earnings and their stock prices have been crushed? As earnings recover, so should the appetite for mergers and acquisitions as well as initial public offerings. But it’s not just that, because it has been such a tough first six months of the year, investment bankers now have only six months to make their year and, more importantly, their bonuses. I believe it will be a feeding frenzy of mergers and acquisition as well as initial public offerings as a result. There is one final catalyst on the merger and acquisition front from my perspective. Watch out for the mergers from across the pond. If the dollar begins to strengthen and the Euro weakens, this could close the window of opportunity for European firms to use their strong currency to fund an acquisition here in the US. Number 3 - Investment Liquidity Reason number 3 is what I call investment liquidity. Everyone knows that we are now in a liquidity crisis. Consumers can’t get any liquidity. Businesses are even having trouble accessing additional liquidity. But I believe, this isn’t the case for investment liquidity (of money that can be invested). First of all, as of June 30, according to the Federal Reserve Board, retail investors had over $3 trillion in Money Market accounts. The 10-year historical average has been under $2 trillion. That’s a lot of money sitting on the sidelines just waiting to be invested. And don’t forget about the trillions of dollars that private equity firms have raised over the past few years. All of that money in private equity needs to find a home as well. And

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Economy Up continued finally don’t forget my favorite, sovereign wealth funds. There is over $6 trillion in these funds and it is rising everyday. This money too needs to find a home. While we may have a consumer and business liquidity crisis, from my perspective, we have plenty of investment liquidity from individual money market accounts, private equity firms and sovereign wealth funds. Number 2 - The election will be over Reason number 2 is the Presidential election will soon be over, setting the stage for a huge relief rally in our market, regardless of who wins. That’s right, I said, regardless of who wins the election. You see, the media paints the picture that Wall Street likes the republicans and hates democrats. From my perspective, that is not true. In fact, it would be absurd, because our stock market has been up more under democratic administrations than republican administrations. What Wall Street hates is not democrats, but rather the “uncertainty.” When the election is over, I believe, so is the uncertainty, setting the stage for a rally, regardless of who wins. And I believe, the winning presidential candidate will have a great influence on which sectors or industries do better or worse, depending on the programs and platforms they push. But the overall market is not about which political party wins. I wish it was that easy, but the fact is our stock market has boomed under democratic presidents and our stock market has crashed under democratic presidents. Likewise, our market has had some great years under republican presidents as well as some really horrible years under republican presidents. Regardless of who wins, I believe we will have a relief rally. And from my perspective, all the winner needs to do is determine which sectors and industries lead that relief rally. Number 1 - The consumer is not dead Reason number 1 is the consumer

is not dead. Despite the high price of gas and food, the collapsing real estate and stock market and the weak employment market, consumers are still spending. And I believe they are about to spend even more. Here’s what I think is about to happen. One of the current great debates on Wall Street is how much of the $600 tax rebate checks consumers will actually spend. The consensus on Wall Street is less than half or 50 percent. The reason is consumers need to pay off high credit card debt, catch up on late mortgage payments or save the money, because they just lost their job. I believe the consensus on Wall Street is wrong and that consumers won’t spend 50 percent of their tax rebate check, but they will spend 200 percent. That’s right, I said 200 percent. Remember earlier, how I said that people spend other people’s money differently than they do their own? Consumers won’t view this tax rebate money as their money even though it is. They have already paid taxes on it and the government is giving them a rebate of their own money. Rather than looking at it like it is their own money, I believe they will look at it as monopoly money or funny money. They didn’t expect it and they didn’t count on it, rather it just showed up. And watch how it will be spent. I don’t believe, consumers will take that $600 tax rebate check and go to Best Buy for example and say show me all of your televisions under $600. I do believe consumers will view the first $600 as free money or their starting point. So instead, they will look for that $1,000 or $1,500 television, which is how we get to my 200 percent forecast. And, by the way, it couldn’t come at a better time. Getting consumers excited at this time of the year could lead right into a strong back-to-school shopping season. And historically, a strong back-to-school shopping season is a great predictor for what kind of holiday shopping season we may have as well. Remember, people in this country were born to do one thing and that is shop. And we do it better than anyone else in the world, especially when we are shopping with other people’s money.

The fundamentals of the U.S. remain strong. Xinhua News 7/22/2008 “Paulson says U.S. banking system sound, fundamentals of economy strong” http://news.xinhuanet.com/english/2008-07/23/content_8750777.htm Treasury Secretary Henry Paulson said Tuesday that the U.S. banking system is sound and the long-term fundamentals of economy are strong. "I believe that the United States is on the right path to resolving market disruptions and building a stronger financial system," said Paulson in a speech delivered at the New York Public Library. "Working through the current turmoil will take additional time, as markets and financial institutions continue to reassess risk and re-price securities across a number of asset classes and sectors," he said. Paulson asked the public to be patient as regulators work through the challenges. "I am well aware that financial market and housing challenges continue to concern America's families," said the Treasury chief, "Progress has not come in a straight line, and we need to remain patient as we work through these challenges." Paulson again urged the Congress to pass this week his proposal to support the troubled Fannie Mae and Freddie Mac. Of the 5 trillion dollars in debt and mortgage backed securities guarantees issued by these two companies, over 3 trillion dollars is held by U.S. financial institutions, and over 1.5 trillion dollars held by institutions and central banks overseas, said Paulson. "Because of their size and scope, Fannie and Freddie's stability is critical to financial market stability," he noted. "Investors in our nation and around the world need to know that we understand how important these institutions are to our capital markets broadly, and to the U.S. economy," he added.

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Economy Up The US Economy is defying the dark days of the past and moving forward. John M. Berry 7/22/2008 Bloomberg News, “U.S. Economy Defies the Gloom in Past Quarter”, http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_berry&sid=aFYsqGVoF5mI Sure, the U.S. economy has lots of problems, including falling payroll employment, the highest inflation in 17 years, declining home prices and a shaky financial industry. Consumer confidence has dropped into the basement, partly because of the cost of gasoline, which has gotten so high it's killing sport-utility-vehicle sales. Maybe without the tax-rebate checks, consumers wouldn't have been spending on other stuff. Nevertheless they have. The dollar is in the tank, too, adding to inflation, even for goods coming from China. And for all that, the U.S. economy expanded in the second quarter, and not at too shabby a rate considering the many drags on growth. Even with all the things going wrong -- including the official bear market on Wall Street -- growth probably checked in at about a 2.5 percent annual rate in the second quarter. That's about as fast as many economists think it could grow on a sustained basis without generating more inflation. Some of the gain can be traced to exports, which are soaring at the same time that imports are slowing. That makes a big difference in U.S. economic growth. ``The second quarter appears to be actually better than expected,'' Federal Reserve Chairman Ben S. Bernanke said at a congressional hearing on July 15. ``We're looking at the remainder of the year as being probably positive growth but certainly not robust growth.''

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Economy Up: Rebounding The economy is going to stabilize and rebound James Gerstenzang 7/15/2008 “Bush: Economy is rebounding, market will control energy prices”, Los Angeles Times, http://latimesblogs.latimes.com/presidentbush/2008/07/appearing-relax.html Appearing relaxed, even subdued, President Bush spent approximately 45 minutes in the White House press briefing room this morning at his first full-fledged news conference since late April, seeking to reassure Americans that the economy is rebounding, that the housing mortgage market will stabilize, and that in the short term the market will help control rising energy prices. With Sen. Barack Obama contemplating a trip to Iraq, the president advised him -- or other politicians heading there -- to heed the reports of Ambassador Ryan Crocker, Gen. David Petraeus and Iraqi leaders. "I would ask him to listen carefully," Bush said, making a rare foray into the campaign to replace him and urging those proposing approaches in Iraq to ignore the temptation of adjusting proposals to meet the demands of politics at home and the pressure of such groups as MoveOn.Org, which Bush mentioned by name as "banging on the candidates." Bush sought to assure Americans that their bank deposits were safe. He said they should "take a deep breath and realize their deposits are protected by the federal government," up to $100,000. He acknowledged that his oil proposals will do little to quickly bring new supplies to the market and thus lower prices, but he said that

new offshore exploration for oil could "change the psychology," and convince the markets that supplies would increase -- a factor, he said, in setting prices. Asked why he wasn't specifically asking for greater personal efforts by Americans to save energy, he said "they're smart enough to figure out whether they're going to drive less.... Americans are plenty smart people." As for a second economic stimulus package, he said he wanted to see how the first one was working, but added: "We're always open-minded."

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Business Confidence High Business confidence is high now. David Gardner 7/17/08 InformationWeek, “Nokia Optimistic After Shipping 122 Million Handsets In 2Q”, http://www.informationweek.com/news/mobility/business/showArticle.jhtml?articleID=209100661&subSection=Al l+Stories An upbeat financial report from Nokia (NYSE: NOK) on Thursday helped erase some of the gloom and doom that had been hanging over the mobile phone handset market. Excluding special items, the firm's profits climbed 8% to $2.18 billion. Already the world's largest handset provider, Nokia said it shipped 122 million units in its second quarter, extending its market share to 40% from 38% last year. The company said it expected to grow its share even more in the future. However, restructuring costs, a slowing global economic situation, and special items caused the company to report a 61% drop in profits. In early trading after the release of the financial report, Nokia's stock jumped 8%. "Looking at the rest of the year, we are optimistic and have had

good feedback about the broad range of new products we expect to sell in our device business," said Nokia CEO Olli-Pekka Kallasvuo, in a statement. "In the second quarter we saw good momentum in the early stages of our services and software business and we believe that the next wave of growth will be driven by devices linked with services." Nokia said its services and software net sales were up 42% sequentially. The firm's generally positive financial report came as other major handset providers prepared to release their reports in the coming days. Sony (NYSE: SNE) Ericsson earlier surprised the handset universe with a warning that soft European demand for handsets was depressing sales. Sony Ericsson is scheduled to release its financial report Friday. Noting that the average price of a Nokia handset dropped to $117 from $143 in the previous year's second quarter, the firm estimated the industry's mobile device volumes at 303 million units -- up 15% year on year and 3% sequentially. The company noted that its infrastructure equipment operation -- Nokia Siemens Networks -- recorded a operating profit margin of 6.7% in the quarter. "Nokia Siemens Networks delivered a second quarter with good net sales

growth and improved profitability," said Kallasvuo.

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A2: No Recessions The US is not in a Recession. John M. Berry 7/22/08 Bloomberg News, “U.S. Economy Defies the Gloom in Past Quarter”, http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_berry&sid=aFYsqGVoF5mI In spite of the hand-wringers, the U.S. economy isn't mired in a recession -- and that's not just a technical matter of definitions. It's a matter of how many jobs are likely to be lost as the country works its way out of the mess created by the bursting of the housing bubble, the resulting financial-market turmoil and soaring energy prices. At a July 16 hearing, Massachusetts Democratic Representative Barney Frank, chairman of the House Financial Services Committee, said ``if the numbers on employment in the second half are no better than those for the first half, we are on track to lose nearly 1 million jobs this year.'' That's true, though with about 138 million payroll jobs, that would be a loss of three-quarters of 1 percent. Losses in recessions normally are much higher than that. Early in 2002, after the last recession had ended, the 12-month job loss was more than 2 million, according to the Bureau of Labor Statistics. The unemployment rate, which was 5.5 percent in both May and June, is about a percentage point higher than it was in the first half of 2007, and it is likely to increase unless economic growth becomes stronger than now expected.

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***Uniqueness: Sectors***

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Energy Prices High Energy Prices High Associated Free Press 7/16/08, “US inflation soars at 26-year high on energy prices.” http://afp.google.com/article/ALeqM5hY5o_vyFmCDYRKgGAgNgevb2XGrA Date Accessed: July 22, 2008 NW Soaring energy costs drove US consumer prices up 1.1 percent in June to an annual pace of 5.0 percent, data showed Wednesday, prompting a central bank warning and rising stagflation concerns. The monthly advance in the Labor Department's consumer price index (CPI) was the sharpest since June 1982, while a 0.3 percent rise in core CPI excluding energy and food was the strongest since January.

Energy Prices on a 26-year High Veronica Smith Staff writer for AFP. 7/16/08. “US inflation soars at 26-year high on energy prices.” Agence France-Presse (AFP). http://afp.google.com/article/ALeqM5hY5o_vyFmCDYRKgGAgNgevb2XGrA Soaring energy costs drove US consumer prices up 1.1 percent in June to an annual pace of 5.0 percent, data showed Wednesday, prompting a central bank warning and rising stagflation concerns. The monthly advance in the Labor Department's consumer price index (CPI) was the sharpest since June 1982, while a 0.3 percent rise in core CPI excluding energy and food was the strongest since January. The surprisingly stiff momentum in consumer prices exceeded analysts' consensus forecasts of a gain of 0.7 percent in headline inflation and a 0.2 percent rise in core inflation. On a 12-month basis, CPI was up 5.0 percent in June, the hottest annual inflation level since May 1991. Core CPI was 2.4 percent higher than in June 2007, the strongest rate since March. The report underscored Federal Reserve concerns about rising inflation and sluggish growth -- the noxious combination of stagflation -- as the economy battles fierce headwinds from financial turmoil and the worst housing crisis in decades. Kenneth Beauchemin, US economist at Global Insight, said the inflation trend combined with the current growth outlook signals the Fed "will take a pass on rate hikes until 2009. Indeed, the remote chance for financial disaster in the coming months keeps a rate cut on the table." The Labor Department said that energy prices accounted "for around two-thirds" of the rise in overall inflation in the world's biggest energy consumer. Energy prices advanced a whopping 6.6 percent in June, following a 4.4 percent increase in May. Gasoline prices rose a searing 10.1 percent, accounting for slightly more than half of the total advance in CPI in June, and were 32.8 percent higher than in June 2007.

Energy Prices Significantly Higher when compared to 2007 prices USAgNet. 07/18/2008. “Record High Energy Prices and Market Volatility Continues.” USAgNet. http://www.usagnet.com/story-national.php?Id=1685&yr=2008 Market volatility continues in crude oil markets. A barrel of West Texas Cushing Sweet Crude Oil reached a record high of $145.66 on July 11th, but the price declined to $134.60 on July 16th. The July 16th price is a 1.2 percent decrease over June's price of $136.25 and a 79 percent increase over the July 2007 price of $75.06. "Gasoline and diesel prices continue to hover in record territory, and oil prices are reacting to economic and political news from around the world," said Tommi Makila, an Iowa Department of Natural Resources Energy Policy Analyst. "The crude oil price drop this week has been due to the slowing U.S. economy and expected petroleum demand reduction. On the other hand, bad news from oil producing countries could very well push oil prices back to record highs. Market volatility seems to be here to stay." The July 15th average price of 10 percent ethanol blended midgrade gasoline in Iowa was $3.93 per gallon, an 1.8 percent increase from June's average price of $3.86 per gallon and a 27 percent increase from the July 2007 price of $3.10 price per gallon of the same blend. Diesel fuel prices remain high as well. The July 15th average price for diesel in Iowa was $4.69 per gallon, $0.01 higher than June's price and up 59 percent from the July 2007 price of $2.95. With high gasoline and diesel prices dominating media headlines, the prospect of higher utility bills this coming heating season may come as a surprise to many Iowans. "Natural gas and other heating fuel prices are significantly above last year's levels. If prices remain at this level or go up, many Iowans will face higher utility bills this winter," Makila said.

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Gas Prices High Gas Prices Skyrocket Atlanta Business Chronicle 7/22/08. “Georgia ranks high in gas price vulnerability” http://www.bizjournals.com/atlanta/stories/2008/07/21/daily28.html date Accessed: July 22, 2008 NW. Georgia placed third in the nation, with its residents spending more than 7 percent of their incomes, on fuel, according to a report released Tuesday by the Natural Resources Defense Council. The report also shows that Georgians spent $2,369 on average in 2007 for gasoline. The report highlights two areas: vulnerability to high oil prices and implementation by states of alternatives and solutions. Drivers in Mississippi, which ranks at the top of the list, spend an average of more than 8 percent of their income on gasoline, while Connecticut drivers, the least vulnerable state, spend 3.17 percent of income on fuel.

Gas prices hit an all-time high The Capital Times 7/04/08. “Another all-time high for Wisconsin gas prices.” The Capital Times. http://www.madison.com/tct/news/294722 People traveling during the Fourth of July weekend will likely be paying record prices for gas. Both the state and national average price for a gallon of gas hit all-time highs Friday. The average price of gas in Wisconsin reached $4.075 per gallon for regular unleaded, slightly higher than the previous record of $4.068 set Thursday. The national average price for a gallon of regular unleaded reached $4.101 Friday, breaking the previous record of $4.098, also set Thursday. Gas prices have climbed every day this week.

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Oil Prices High Oil Prices Surge Pete Chagnon, Staff writer on Politics and Government at OneNewsNow, 7/22/08. “Oil prices surge, Congress responsible” http://www.onenewsnow.com/Politics/Default.aspx?id=183692 Date Accessed: July 22, 2008 NW. The Institute of Energy Research says a dramatic increase in lease protests is threatening American energy supplies -- and that the U.S. government is to blame in part for record-high oil prices. According to the IER, the U.S. government has increased taxes on oil companies that produce on federal land by 50 percent last year, which makes it more expensive to produce energy in America.

Oil Prices at Record Highs Associated Free Press 7/15/08. “Oil prices near record highs” http://afp.google.com/article/ALeqM5iULbqz7a_RWOvuo-LtKNAkNzTERw Date Accessed: July 22, 2008 NW. New York's main oil contract, light sweet crude for August delivery, gained 1.21 dollars to 146.39 dollars a barrel. That was close to the record high of 147.27 that was struck last Friday. The price of crude oil has more than doubled over the past 12 months to strike record levels above 147 dollars per barrel last Friday, lifted by stubborn fears about tightening global energy supplies and fierce demand. Oil has enjoyed a record-breaking 2008 after smashing through 100 dollars per barrel at the start of the year. Sky-high prices have sparked protests around the world amid fears for economic growth.

Oil prices remain high Ben Rooney and Kenneth Musante. Staff Writer for CNN Money. 6/30/2008. “Oil touches record but ends lower.” CNN Money. http://money.cnn.com/2008/06/30/news/economy/gas/. Retail gas prices and crude oil futures reached record highs Monday amid a backdrop of Mideast tensions and dollar concerns, but crude ended the day lower. The national average price for a gallon of gasoline climbed to $4.086, according to a daily survey by motorist group AAA. That was up 0.7 cent from $4.079 the previous day, and eclipsed the previous mark of $4.08 set June 16. Gas prices have risen 2.9% in the last month and are almost 38% higher than where they were a year ago. Meanwhile light, sweet crude for August delivery settled down 21 cents at $140 a barrel after earlier setting a trading record of $143.67 a barrel, 50% above the price at the end of 2007. Despite the pullback, oil prices remain consistently over $140 a barrel.However, Grisanti warned that the future rate of consumption from developing nations such as China, India and the former Soviet Union will outstrip supply. "My thoughts are the market just goes higher from here... There's nothing on the horizon that's going to turn this thing around," he said.

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Oil Prices Down Oil Prices Drop BBC News 7/19/08. “Oil price drop in volatile market” http://news.bbc.co.uk/2/hi/business/7513608.stm Date Accessed: July 22, 2008 NW. Crude prices have fallen more than 11% over the past four days, knocking $15 off a barrel of oil in that period. Fears of high prices weakening the US economy set oil off on one of the biggest weekly falls since 1983. Sweet crude for August delivery fell 41 cents to settle at $128.88 in New York - far off the record of more than $147, reached one week ago. A key reason for this week's decline was evidence of falling demand for gasoline in the US, despite it being the peak summer driving season, analysts said.

Oil prices reducing BBC News 7/22/08. “Why have oil prices been falling?” BBC News. http://news.bbc.co.uk/2/hi/business/7519414.stm But since then, prices have fallen on both sides of the Atlantic, dipping almost 13% to a low of $128.23 for a barrel for US light sweet crude on 18 July, and down 10% to $129.66 for Brent crude. Crude oil prices affect the wholesale cost of the petrol and diesel paid for by the major retailers. A number of those firms have passed on the lower prices to motorists at their forecourts. Why did oil prices fall last week? The perception last week that the slowing US economy could trigger a worldwide economic slowdown had clear implications on the expected demand for oil. Countries such as India and China depend on the US, Europe and Japan as major markets for their manufactured goods and services. If demand for their goods declines, as is expected, so too will their thirst for the oil and fuel needed to produce the products. Another factor helping to cut oil prices was on the supply side, where there were indications that tensions were easing between oil-producer Iran and the US over its nuclear programme. This reduced fears that the supply of crude oil from Iran could be interrupted. Traders also pointed to news that a Chevron oil pipeline in Nigeria had reopened following an attack on it in June. According to industry experts Platt's, the wholesale price of fuel also fell substantially last week. The price of refined diesel, for example, has fallen by 8.3% since it reached an all-time high on 11 July of $1,241 per metric tonne, according to Platt's data . And as for one of the key fundamentals of the oil market - demand from China - government figures showed that its imports of crude oil were 3.2% higher in June than a year earlier.

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***Links***

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New Energy Policies New energy policies will hurt economic growth The Energy Journal January 1 2004 The possibility that R & D aimed at increasing energy efficiency diverts funds from economic growth is consistent with the causal relations identified by the VECM. The elements of [alpha] indicate that the third cointegrating relation loads into the [DELTA]GDP equation (Table 7). This result indicates that energy prices "Granger cause" GDP (Granger, 1969). That is, higher energy prices slow GDP. This result is consistent with those generated by Hamilton (1983), who finds that sharp increases in real oil prices "Granger cause" recessions in the US economy during the post war period. A causal relation that runs from energy prices to GDP implies that carbon taxes and/or tradable permits will slow economic activity. The negative macroeconomic effects of higher energy prices are reinforced by lower energy use. The elements of [alpha] indicate that the second cointegrating relation loads into the [DELTA]GDP equation (Table 6). This indicates that energy use "Granger causes" GDP. This result is consistent with analyses of the causal relation between US economic activity and energy use that account for energy quality (Stern, 2000). A causal relation that runs from energy use to GDP indicates that efforts to reduce carbon emissions by reducing energy use will slow economic activity.

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Energy Efficiency Energy efficiency mandates prevent consumers from making bigger gains. Jerry Taylor (director of natural resource studies at the Cato Institute) 1/21/2004. CATO Institute. Nor is it even true. According to the analysis offered by the Clinton administration in support of its proposed standard, the price of the average air conditioner on the market will increase from $332 to $435, but 40 percent of all consumers will never save enough on their energy bills to offset the higher price attached to the "efficient" air conditioner. So even by the conservationists' own calculations, 60 percent of consumers arguably may have "won," but 40 percent most surely "lost." But wait, there's more. Those "winners" will only have won if the net economic savings gained from their forced investment in energy efficiency is greater than the returns that might have been available to them had they put their money in other investments. In other words, just because you save a net of three percent a year by buying the energy efficient air conditioner does not mean you made a good investment. If you could have gotten seven percent a year by investing in municipal bonds, the federal mandate will have cost you money.

Energy efficiency standards just result in more use sapping consumer savings and damaging the economy. Jerry Taylor, director of natural resource studies at the Cato Institute. 1/21/04. CATO Institute. Of course, there are other arguments marshaled by the conservationists for these standards. More efficient appliances, they say, will reduce energy demand, thus helping to prevent blackouts during hot summer days. And in fact, it's estimated that electricity demand will drop one percent during hot summer days because of these standards. But if we think that reducing demand during hot summer days is worthwhile, wouldn't it be better to simply ensure that the price of electricity during hot summer days reflects it's cost? If regulators were better able

to allocate scarce resources than markets via the pricing mechanism, then socialism would never have collapsed in Eastern Europe. But even so, fundamental laws of economics are being ignored. To whit, if you reduce the cost of turning up your air conditioner on a summer day (which is exactly what an energy efficient air conditioner does), all things being equal, you will turn up your air conditioner on a summer day more often. Economists who have studied this dynamic refer to it as "the rebound effect" and have discovered that energy efficiency standards only save money and energy if you don't consider the fact that reducing the marginal costs of energy consumption will result in...more energy consumption. Once you do consider that fact, much of the advertised energy savings from the tighter standards disappear. No matter how you cut it, mandatory energy-efficiency standards are a bad deal for consumers and the economy as a whole, and no amount of Orwellian rhetoric or half-baked economics can change that fact.

Energy efficiency is bad because it crowds out investments and steals funds vital economic growth. The Energy Journal, 1/1/04 If present, demand-pull innovations that reduce energy intensity may not be free. Developing energy efficient technologies consumes research and development funds, and using these funds to increase energy efficiency during periods of higher prices may crowd out investments that would otherwise speed economic growth. Goulder and Schneider (1999) evaluate these potential costs with a parameterized model. Their results indicate that using a limited supply of R&D funds to increase energy efficiency diverts funds from investments that spur economic growth and therefore, increases the gross costs of a carbon tax.

Mandating efficiency increases costs Ben Lieberman, policy analyst with the Competitive Enterprise Institute, “Wasting Energy on Energy Efficiency,” April, 1999, http://www.libertyhaven.com/politicsandcurrentevents/energy/wastingenergy.shtml, accessed 2/2/03 Energy efficiency, Washington-style, comes at a cost. For example, DOE estimates that the latest energy standard for refrigerators will add $80 to the cost of a new model when the standard takes effect in 2001. DOE is also considering regulations mandating certain highly efficient types of clothes washers that currently cost hundreds more than their conventional counterparts. One study estimates the total cost of appliance standards of $59 billion. True, these and other goods save on energy, but the payback periods are often very long. Beyond appliances, studies have also shown that the sticker price of automobiles has increased because of NHTSA!s Corporate Average Fuel Economy (CAFE) standards, and that energy-saving features add considerably to new housing costs.

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Energy Efficiency Hurts Small Businesses Businesses don’t want efficiency Paul Roberts (energy expert and writer for Harpers) 2004, The End of Oil, pg. 232 Of course, Lovins’ complaint highlights one of the main flaws of the efficiency program: that most energy vendors, like any business, don’t want to sell less of their product. While greater energy consumption imposes extra costs on society, such as supply risk and climate, it means nothing but profits for energy producers — even more so when supplies run short and prices spike. Reversing this powerful incentive, as we’ll see in later chapters, will require innovative policies and some tough political choices.

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Carbon Tax A carbon tax would tank the global economy. The National Interest, Fall 1999 The Energy Modeling Forum at Stanford University (EMF) recently compared estimates of the costs of meeting the Kyoto targets made by ten modeling teams from around the world. They show that with no international trading of emission rights, the United States would need to levy a tax on carbon emissions of between $90 and $400 per ton of emissions in 2010 to accomplish its Kyoto objectives; this is equivalent to a tax on coal of $70$320 per ton (versus its current price of about $25 per ton!). Most of the teams estimate that such a tax would cost the U.S. economy between $45 and $200 billion a year (about 0.5 to 2.0 percent of 2010's GDP). They show similar, or even larger, costs for Europe and Japan.

Carbon taxes send ripple effects throughout the economy by hurting labor supply. Ian W. H. Perry, October 2003, Oxford Review of Economic Policy 19, 2003, http://216.239.57.104/search?q=cache:LjghhWTgEgsJ:www.rff.org/Documents/RFF-DP-0346.pdf+carbon+tax&hl=en By increasing energy prices, carbon taxes drive up product prices throughout the economy, since energy is an input in most production sectors; this leads to a slight reduction in real household wages and labor supply. In general, the efficiency loss from this reduction in labor supply, or “tax-interaction effect,” exceeds the benefits from the revenue-recycling effect, implying that carbon tax swaps increase rather than decrease the costs of labor taxes. This finding is not surprising because, as explained below, it is entirely consistent with the familiar result in public finance that the efficiency costs of narrow taxes (ignoring externalities) tend to exceed those of broad taxes on labor income.

Carbon tax increases the price of products Ian W. H. Perry, October 2003, Oxford Review of Economic Policy 19, 2003, http://216.239.57.104/search?q=cache:LjghhWTgEgsJ:www.rff.org/Documents/RFF-DP-0346.pdf+carbon+tax&hl=en A second wave of papers revealed another linkage with the labor market that undermines the double-dividend argument (e.g., Bovenberg and de Mooij 1994; Bovenberg and van der Ploeg 1994b; Bovenberg and Goulder 2002; Parry 1995, 1997). A carbon tax increases the price of electricity, gasoline, and other energy goods; in turn, this drives up the prices of products in general, since they require energy inputs in production. The general increase in the price level reduces real household wages, which should slightly reduce employment given econometric evidence that lower real household wages lead to lower labor force participation and work effort. This leads to an efficiency loss of t , where is the (small) reduction in labor supply (this is the addition to the deadweight loss triangle in Figure 2 from a slight shift in of the labor supply curve). And labor tax revenues fall by t ; to maintain revenues, labor taxes must be increased slightly, resulting in an efficiency cost of . The combined loss from these two effects, is referred to as the tax-interaction effect.

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Coal Links Regulations on coal would devastate the economy like nothing before. The National Interest, Fall 1999 In a world of models, this might not seem to be a very high price, but models have limitations. For instance, none of them include the effects of carbon "sinks" (absorbers of gases such as trees) or of possible losses from unemployment or inflation. Nor do they note that, by 2010, about half of our electricity will be coal-fired--most of it consumed east of the Rockies where coal will fuel about 60 percent of electricity generation, with some states, such as Ohio, being almost entirely dependent on that fuel. Meeting our Kyoto obligations, then, could entail cutting the supply of electricity east of the Rockies by upwards of one-fourth. Many electricity-intensive industrial plants (e.g., aluminum and chemical ones) would be shut down. The implied limit on coal would shutter most of our steel industry, with our supply shifting to countries not constrained by the Protocol, which is to say the developing countries. Those developing nations would have to burn coal to make steel to ship to us, so there would be no net reduction in global emissions. More generally, if only the Annex B countries limit their high carbonusing industries, such industries will expand elsewhere, a phenomenon dubbed "leakage." Lest one think this implausible, consider that pollution controls in the advanced countries already lead to the construction of refineries and chemical plants in less fussy, poorer ones. Relying on less optimistic assumptions than those of the ten modeling teams, the Energy Information Administration of the Department of Energy comes up with a much larger loss of U.S. output--about 3 percent of GDP by 2010 (roughly $300 billion in total, an amount equivalent to $960 per person or $3,800 for a family of four). This is akin to losing a year of economic growth between now and 2010. The loss could be higher still if, as is perfectly imaginable, congressional and bureaucratic micro-managers decide which uses of carbon-based fuels are more or less socially worthy than others.

Regulations on the coal industry crush the economy. (carbon tax, gas turbines, co2 reductions, renewables)

Testimony of Dr. Harold Shobert, Director for the Energy Institute @ Penn State. Federal News Service June 8, 2000. Listening to the barrage of problems, criticism, even invective, facing the coal industry, it is easy to forget that coal is the backbone of America's energy economy. The majority share of electric power production, as well as much process and space heating, belongs to coal. Most of us have heard some of the proposals that would adversely affect the coal industry: a carbon tax, reliance on natural- gas-fired turbines for electric power generation, carbon dioxide reductions, mandates for using "renewables", and of course the tired old epithet that "coal is a dirty fuel." Global warming--real or imaginary, friend or foe...carbon dioxide emissions--a threat to the planet, benign, or good for agriculture...while the debate rages on, the debaters occasionally pause long enough to agree on one point: coal is the "bad guy." According a 1995 EIA estimate, coal reserves are about a trillion tons worldwide, more than 235 times the world's annual consumption. Unquestionably, coal has great potential as a future source of energy. There is little doubt that coal combustion must continue as a major contributor to the energy economy for the near- to mid-term future. However, environmental pressures may militate against expanded markets for coal as an energy source, and the problem is likely to be carbon dioxide emissions. The National Research Council (NRC) pointed out in 1995 that, "Of all the environmental issues facing the future use of coal, none is as potentially far reaching as the worldwide concern over global climate change". The heat generated in arguments about the Kyoto Accord sometimes seems to be about as large as the heat generated by burning the world's annual coal production. It is likely that environmental pressures on present-day, conventional coal utilization will only intensify. This factor, taken by itself, would cause us to question the long-term future of the coal industry. Environmental issues also severely impact the metallurgical coke industry, the present source of most chemicals from coal. The traditional coal industry and coal markets in the dawning of the 21st century are under increasingly intense assault.

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Cap and Trade Hurts Economy Cap and trade is the worst thing for the economy ever. NAM (National Association of Manufacturers) 2004 NAM Point Paper Opposing Cap-and-Trade and Mandatory Reporting, http://www.nam.org/s_nam/doc1.asp?CID=141&DID=226226 A cap and trade program will add to the deficit. The difference between a cap and trade program and a carbon tax is that under a carbon tax, the government collects more revenue, which it can use to offset other taxes to counter the negative impact of the tax. Under a cap and trade system, as wages and economic activity decline, the government will collect less revenue. The NAM and the overwhelming majority of the American people vehemently oppose increases in energy taxes, but ironically, the fact is that a cap and trade program would be even more destructive to the economy than an energy tax. A 1999 study by economists from Resources for the Future and Stanford University (Parry, Williams and Goulder) found that a cap and trade program designed to reach Kyoto targets would cost at least double that of a carbon tax. The study found that reducing U.S. carbon emissions by 5 percent with a cap and trade would cost 10 times more than a carbon tax designed to achieve the same end. Either approach – taxes or caps – would be devastating to industrial recovery and to future economic growth in the U.S.

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Cap and Trade Hurts Competitiveness Cap and Trade jacks US business competitiveness NAM (National Association of Manufacturers) 2004 NAM Point Paper Opposing Cap-and-Trade and Mandatory Reporting, http://www.nam.org/s_nam/doc1.asp?CID=141&DID=226226 By raising the prices of electricity and natural gas, a cap and trade program will be highly regressive, hurting the poor, the elderly, minorities and anyone on a fixed income, disproportionately. It will also reduce general prosperity and productivity. The CBO stated in the same report, “The higher prices for energy and energyintensive products that would result from a cap-and-trade program would reduce the real income that people received from working and investing, thus tending to discourage them from productive activity. That would compound the fact that existing taxes on capital and labor already discourage economic activity.” As the NAM observed in our January 7, 2003, letter to members of the Senate Commerce Committee, “While some companies would profit from a government program that would allow them to sell emissions reductions to others, the overwhelming majority of U.S. companies will experience this as a tax on growth that will hurt their international competitiveness and thus, their workers and stockholders.”

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Cap and Trade Hurts Consumers Cap and Trade would hinder consumers and raise electricity prices. Wall Street Journal august 2001, “How Much Is the Right To Pollute Worth?” http://www.mindfully.org/Industry/Right-To-Pollute.htm A key element for designing a cap-and-trade program concerns the issue of who, exactly, will reap the value of the emissions allowances. After all, these allowances create value from thin air, so to speak, by transforming something that had been free -- the right to emit -- into a financial asset. Who gets the initial value of this asset depends on how government distributes the allowances to carbon-emission producers. If government sells the allowances in an auction, then 100% of the initial value goes to government in the form of sale revenue. If government gives away the allowances, then 55% of the value goes to the recipients of the allowances -- firms and their shareholders -- in the form of higher profits (created by the increased price of fossil fuels without the need to buy the initial allowances). But the remaining 45% of the value goes to government in the form of increased tax revenues paid by those firms and shareholders on their higher profits. Either way, government pockets a nice chunk of change. At the same time, something that had been free -- the right to emit -- now has a cost attached to it. Who pays? We all do. The cost of the allowances becomes a cost of doing business and thus, in the long run, is passed on to consumers in the form of higher prices for anything that uses fossil fuels. The largest increases will show up in the prices of electricity, natural gas, fuel oil and coal, and gasoline. The CBO estimates that an allowance price of $100 per metric ton of carbon would cause a 2.8% increase in the general price level. The increase in the prices will be felt in two ways: as a cost to the economy as a whole (as consumers cut their consumption of stuff with a high carbon content) and as a transfer of income from those who consume to those who receive the value of the allowances. Moreover, since consumers with a higher consumption-to-income ratio will pay a larger share, and since these consumers tend to be lower-income, any program will be regressive. Oops, big political problem.

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Tradable Permits Hurt the Economy Tradable permits would jack the economy short term and hurt US competitiveness. Oil & Gas Journal December 13 1999 Margo Thorning (Analyst at American Council for Capital Formation) Center for Policy Research. First, CEA cost estimates assume full global trading in tradable emissions permits (including trading with China and India). Most top climate policy experts conclude that this assumption is extremely unrealistic, because the protocol does not require developing nations -- which will be responsible for most of the growth in future CO[2] emissions (Fig. 4) -- to reduce their emissions, and many have stated that they will not do so. Second, the Administration's (CEA) cost estimates assume that an international CO[2] emissions trading system can be developed and operating by 2008-12. This assumption is unrealistic, according to Ellerman's (1999) analysis. Third, the cost estimates are based on the Second Generation Model (SGM) developed by Pacific Northwest National Laboratory. The SGM appears to assume costless, instantaneous adjustments in all markets; the model is not appropriate for analyzing the protocol's near-term economic impacts, according to CRA's Montgomery (1999). As Massachusetts Institute of Technology Prof. Henry Jacoby (1999) observes, there are no short-term technical changes that would significantly lower US carbon emissions.

Tradable permits won’t work unless they are untopical. They’ll just jack the economy. Margo Thorning (Ph.D Senior VP and Chief Economist for American Council for Capital Formation.) March 31, 2000 Federal News Service Another measure of the burden that near-term reduction of emissions would place on the U.S. economy is the cost of a tradable permit to emit a metric ton of carbon. Under a permit system, permits would trade at the marginal cost of abatement. (Carbon taxes could be imposed instead of tradable permits; there should, in principle, be no difference in the energy prices under the two alternative systems.) If international trade in permits is not allowed, the cost of a permit to meet the Kyoto target varies from a low of $240, according to Professor Manne and Dr. Richels, to a high of $348 per metric ton, as estimated by EIA (see Figure 4). Energy policies hamper economic growth Oil & Gas Journal December 13 1999 Margo Thorning (Analyst at American Council for Capital Formation) Center for Policy Research Even if developing countries agree to participate fully, two major obstacles to developing a trading system would remain: allocating CO[2] emissions rights and distributing the revenue (Ellerman 1999). In addition, both developed and developing countries may find it difficult, if not impossible, to sell CO[2] emissions credits because of energy's vital role in economic growth. The costs of tradable permits to emit a ton of carbon are another measure of the burden that near-term emissions reduction would place on the US economy. These costs, which vary, depending upon how much trading takes place, are about $ 120-348/tonne for reducing emissions to 7% below 1990 levels.

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Tradable Permits Hurt Small Business Permits don’t help small businesses, which can’t innovate quick enough. They just have to suck up the tax Fredrick Dahlberg National Association of Manufacturers, June 4, 1998, http://www.house.gov/smbiz/hearings/105th/1998/980604/dahlberg.htm, accessed 2/1/03 Will this problem be solved, as the Administration has been suggesting, by the efficiencies of carbon permit trading? I suggest to you that all that permit trading means is that I have to buy permits from someone -- on a commodity market, from an international broker, or from a neighboring company that is closing its doors. And buying a permit to use fuel is the same thing as a tax, or the same thing as paying the higher prices for the energy in the first place. Whether through a trading scheme, a tax, or a quota, once energy becomes unaffordable, my business and thousands of others will close their doors. In summary, this Administration appears to be perfectly willing to legally bind the United States to energy-reduction goals that can only be met during the short-time frame available by closing businesses like mine.

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Subsidies Hurt the Economy Subsidies distort the market and stifle the job growth necessary to a strong economy. The Union Leader August 15, 2003 Sununu, however, said, "Sound energy policy should remain free from harsh mandates and government subsidies that distort energy markets, stifle job growth and hurt our nation's economy. While the Senate Energy Bill included some provisions that would be helpful to New Hampshire and the nation -- in particular a ban on MtBE -- other measures, including a massive ethanol mandate and excessive package of subsidies for private industry, made the legislation unacceptable. "Payouts and tax breaks for private industry -- industry that should demonstrate marketability without using taxpayer dollars -- does not achieve the fairness, equity and efficiency that this country's economy needs to stay strong," Sununu said.

Subsidized conservation is harmful to the economy. Robert L. Bradley (president of the Institute for Energy Research) August 27, 1997, http://www.cato.org/pubs/pas/pa-280.htm Environmental tradeoffs aside, economic problems threaten the future of utility-provided, ratepayer-subsidized DSM. The law of diminishing returns suggests that the supply of negawatts is a depletable resource. Declining benefit/cost ratios of utility DSM programs are a fact of life in California, [224] not to mention other states. The debate is really about how great the cost savings overestimates have been, not about how much cost-effective energy conservation really remains. Of note are two particularly rigorous studies by the Illinois Commerce Commission and the DOE's Energy Information Administration. [225] The former examined the full costs of state natural gas DSM-type programs from their inception in 1985 through 1994. The commission found that no program showed benefits greater than costs. [226] In fact, most programs demonstrated benefits that were a mere 25 percent of costs. The second study examined the total costs and benefits of DSM programs nationwide. The Energy Information Administration concluded that, from 1991 to 1995, approximately $12 billion (nominal) was spent on DSM programs that yielded 215.6 billion kWh of energy savings. Yet the cost of DSM programs over that period averaged 5.58 cents per kWh. Over that same period, however, fossil fuels produced electricity at 2.35 cents per kWh. Thus, subsidized energy conservation was twice as expensive as generated power, much of which came from facilities with unused available capacity (such as in California). [227] If there were ever an economic honeymoon period for ratepayer-subsidized energy efficiency (and most academic and many professional economists doubt that there was ever an efficient phase of DSM based on empirical investigation and the pure logic of consumer choice), [228] those days have passed.

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Banning Fossil Fuels Hurts the Economy Banning fossil fuels crushes the economy Bjorn Lomborg (Associate Professor of Statistics in the Department of Political Science, University of Aarhus, Denmark) 1998 The Skeptical Environmentalist: Measuring the Real State of the World. p. 305 We could, of course, achieve almost instantaneous stabilization of the atmosphere’s CO2 content and achieve a slow stabilization of the climate by banning all use of fossil fuels right now, but at the same time doing so would practically bring the world to a standstill. This would have incalculable consequences, both economic, healthrelated and environmental.2572 We could also choose to let things take their course, continue our ever increasing emissions of CO2 and then pay the costs by adapting society in 2100 and later by building dikes, moving island populations, changing farming methods, etc.

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Ethanol Regulations Hurt Economy Ethanol is key to the economy because it saves billions a year Robert Dinneen (President Renewable Fuels Association) July 16, 2002, Federal Document Clearing House Congressional Testimony Responding to the need for increased domestic energy resources, reduced air pollution from motor vehicles and rural economic stimulus, the Congress has consistently supported tax incentives to encourage the increased production and use of fuel ethanol. Today, refiners and gasoline marketers using 10% ethanol blends pay 13 per gallon in excise taxes, a 5.3 per gallon reduction from the tax paid on straight gasoline. The tax incentive is reduced to 5.2 per gallon in 2003 and 5.1 per gallon in 2005. The federal ethanol program has been an unmitigated success. From just 175 million gallons in 1980, the industry has increased more than ten-fold to more than 2 billion gallons today. As a result, farmers across the country have received higher prices for their commodities, more than 200,000 jobs have been created in rural America, the U.S. has reduced its oil imports, and most importantly, Americans are breathing cleaner air. Taxpayers also benefit because reduced farm program costs and increased income tax revenue attributable to the federal ethanol program provide a net savings to the U.S. Treasury of $3.6 billion a year. Indeed, for every dollar invested by the federal government to stimulate ethanol production and use, approximately $6 is returned to the treasury in tax revenue and savings from reduced government outlays.

Ethanol adds millions of dollars and thousands of jobs to the economy Robert Dinneen (President Renewable Fuels Association) July 16, 2002, Federal Document Clearing House Congressional Testimony Economic Benefits: The processing of grains for ethanol production provides an important value added market for farmers, helping to raise the value of commodities they produce. As the third largest use of corn behind feed and exports, ethanol production utilizes nearly seven percent of the U.S. corn crop, or over 700 million bushels of corn, adding $4.5 billion in farm revenue annually. The U.S. Department of Agriculture (USDA) has determined that ethanol production adds 25 - 30 to every bushel of corn. The production of ethanol has sparked new capital investment and economic development in rural communities across America. There has not been an oil refinery built in this country in 25 years. But during that time 63 ethanol refineries have been built, stimulating rural economies and creating jobs. USDA estimates that a 100 million gallon ethanol production facility will create 2,250 local jobs for a single community. Industry growth offers enormous potential for overall economic growth and additional employment in local communities throughout the country. According to a Midwestern Governors' Conference report, the economic impact of the demand for ethanol: Adds $4.5 billion to farm revenue annually . Boosts total employment by 195,200 jobs . Increases state tax receipts by $450 million - Improves the U-Sbalance of trade by $2 billion - Results in $3-6 billion in net savings to the federal Treasury.

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Stopping Warming Hurts the Economy Stopping warming would jack gas prices and hurt the auto-industry Bruce Ledewitz (Professor of Law, Duquesne University School of Law) Summer 2003 The Boston Public Interest Law Journal The reason for this radical potential for change is not just because the consequences of climate change are serious. Rather, the difficulty is in the way that global warming comes about. Global warming occurs because of factors inherent in our way of life. Greenhouse gases (primarily carbon dioxide) are a byproduct of the combustion of carbon. The combustion of carbon is a hallmark of industrialism and a byproduct of the use of the internal combustion engine. 241 Put simply, cutting greenhouse gas emissions is likely to require less industrial production and less automobile traffic. Since economic and social organizational patterns in this society are premised on both industrial production and on automobile mobility, any substantial lessening of either would mean a serious change in our lifestyle. The domestic gross national product grows, for example, as output grows. As output grows, greenhouse gas production tends to grow. Americans also value the mobility of the automobile. Residential patterns and retail patterns of strip mall development require constant and widespread use of cars. As this required mobility spreads, there tends to be more driving and, thus, more greenhouse gas emission. It is no wonder that efforts to stabilize greenhouse gas emissions in the United States have failed. Simply put, global warming is caused by the way we live. 242 This means that almost anything that we could do about global warming would entail daunting problems for us. For example, most strategies for dealing with global warming involve more expensive carbon, specifically gasoline.

Stopping climate change costs trillions Paul Roberts (energy expert and writer for Harpers) 2004, The End of Oil, pg. 118 Just what climate change will end up costing us is unclear, but the early numbers hardly give cause for cheer. Estimates for the cumulative economic impact of rising sea levels, more frequent hurricanes and droughts, higher rates of infectious diseases, and other climate-related calamities range up to tens of trillions of dollars over the course of this century. Nor are the costs of halting climate change any less frightening. Because 90 percent of manmade CO2 comes from the burning of gas, oil, and especially coal, and because gas, oil, and coal provide more than 85 percent of the world's energy,' we cannot "fix" our climate problem without making substantial changes to our energy economy --- changes that go beyond privatizing OPEC or finding ways to drill through the Siberian ice. According to one analysis, making all the changes to our energy economy that would be necessary to slow CO2 emissions could cost the United States alone a full percentage point of its GNP every year for the next century. As a consequence, Russia is not the only country to voice serious misgivings about climate policy, or to question whether the climate change is even worth stopping.

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Stopping Warming Hurts the Economy Your studies ain’t true, halting warming is very expensive. Bjorn Lomborg (Associate Professor of Statistics in the Department of Political Science, University of Aarhus, Denmark) 1998 The Skeptical Environmentalist: Measuring the Real State of the World, p. 311 However, such an analysis is typically met by the three objections to be looked into in more detail in the accompanying box. In short it is claimed that CO2 emissions can be reduced far more cheaply or even entirely without cost. Most economists are very skeptical of such arguments — if it was already privately profitable to reduce CO2 emissions, it seems surprising that this is not already being done. Several analyses suggest that the acclaimed tremendous reduction potentials are mirages, essentially kept alive by a whole series of costs being overlooked.

Limiting warming steals funds from much-needed programs. Bjorn Lomborg (Associate Professor of Statistics in the Department of Political Science, University of Aarhus, Denmark) 1998 The Skeptical Environmentalist: Measuring the Real State of the World, p. 312 Finally, it is asserted that the efforts to combat global warming are an insurance policy against extreme events. When included in the computer models, these do not alter the results appreciably, but the insurance mentality can be justified by those who harbor an intense dislike of risk-taking. This does not change the fact, however, that the investments would probably be far better made elsewhere, for example in the developing world. The point in this case is that with the best intentions of doing something about global warming, we could end up burdening the global community with a cost much higher or even twice that of global warming alone. As the Kyoto Protocol is unlikely to be implemented with global trading, simply because of the staggering amounts involved in distributing the initial emission rights and the consequent redistribution, Kyoto represents a waste of global resources. If we want to do good, we have to spend our resources more wisely. >

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***Budget***

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CAFÉ Link CAFÉ decreases federal revenue by decreasing gas tax receipts. Congressional Budget Office November 2002, “Reducing Gasoline Consumption: Three Policy Options”, http://www.cbo.gov/showdoc.cfm?index=3991&sequence=7 An increase in CAFE standards would have an indirect effect on revenue collected for the Highway Trust Fund. Improvements in the fuel economy of new vehicles would reduce their gasoline consumption per mile traveled and thus bring in fewer gasolinetax receipts. That decline in receipts would be partly offset as lower driving costs led to more vehicle miles traveled. (Research indicates that increases in VMTs due to lower driving costs could offset the gasoline savings from CAFE-induced changes in fuel economy by roughly 20 percent.) The decline in gasoline-tax revenue because of higher CAFE standards would increase over time as older vehicles were replaced by new vehicles that met the more-stringent standards.

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RPS Links RPS necessitate huge costs for policy design and monitoring costs. Meredith Wingate (Center for Resource Solutions) June 2003, “A Survey of the Administrative Costs to Government of Implementing a RPS, Feed-in Law, Competitive Tender, and Public Benefits Fund”, http://www.resource-solutions.org/Library/librarypdfs/IntPolicy-Administrative.Costs.of.4.Policies.pdf There are two primary costs to government in implementing and administering a renewable portfolio standard (RPS). The first is the design of the policy, and the second comes from monitoring and verifying compliance with the policy. In the international experience, the RPS is often a part of a larger electricity law and the design of the policy is left to the administrative or rulemaking arm of government (e.g., the public utilities commission). This process can range in time from four months to nearly two years, and usually occurs after the law is promulgated. The two primary cost centers for this work from the government’s perspective are staff time and consultant’ fees.1 The range in these costs varies greatly depending on the complexity of the law, size of the market, number of companies impacted, degree of public input, and other factors. Because of the huge variation, we do not attempt to estimate costs with precision here. However, we note that government staffing needs for these activities in U.S. states rarely exceeds 2 fulltime equivalent (staff). If a 6-month process for developing the RPS is used, and additional legal and consulting fees are included, this might equate to $100,000 – $300,000 for the implementation of a state RPS. A national RPS, on the other hand, might expect far greater policy development costs. The other primary cost to government in administering an RPS is monitoring and verifying compliance with the policy. Most US states and countries that have passed an RPS have used one of two primary methods of verifying compliance with the law. The first is a contract path accounting method, and the second is a certificate-based accounting method.

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Nuclear Power Links Both advocates and critics agree that the government will subsidize any new plants. Chicago Tribune January 20 2005 Nuclear industry advocates and critics agree on almost nothing, but both sides say that if nuclear power is to return, major taxpayer subsidy will be necessary. In its so-far-unsuccessful efforts to pass an energy bill, the Bush administration has

a

proposed subsidizing construction of new plants, and some in the industry are pressing for loan guarantees of up to 80 percent of the cost of construction, contending that commercial lenders remain too wary. Officials say it is impossible to determine now how much money the industry would need to build even a handful of new facilities. Exelon's plant at Zion cost $2 billion, adjusted for inflation, when it was built in 1973, and critics say the money could be better spent developing renewable energy sources such as wind power and clean-coal technology.

Government eats insurance costs for the nuclear industry, costing billions each year. Mark Zepezauer and Arthur Naiman 1996 Take The Rich Off Welfare, http://www.thirdworldtraveler.com/Corporate_Welfare/Nuclear_Subsidies.html The insurance subsidy Since 1959, the government has also limited the liability of nuclear utilities for damage caused by accidents. Until 1988, the utilities were only responsible for the first $560 million per accident; then the limit was raised to $7 billion. But $7 billion wouldn't begin to cover the costs of a core meltdown, or even a near meltdown like Chernobyl. That accident's total costs are estimated at $358 billion-not to mention the 125,000 deaths the Ukrainian government figures it has caused. The Energy Information Administration calculates that if nuclear utilities were required to buy insurance coverage above that $7 billion on the open market, it would cost almost $28 million per reactor, for a total annual subsidy of $3 billion. (Even if it could pay its own way, the risks of nuclear power far outweigh its benefits. But that's the subject for another book.)

Investors will never put money into nuclear- subsidies will be necessary. Dashka Slater September 2001 “Free-Market Fallout - construction and operational costs of nuclear power plants”, Sierra Magazine, http://www.findarticles.com/p/articles/mi_m1525/is_5_86/ai_77279545 Deregulation changed the nuclear power equation for good. "In this new competitive generation market, investors don't have any guarantees that the construction costs will ever be recouped," explains Jerry Taylor of the Cato Institute, a libertarian think tank. "No matter how many subsidies we throw at this technology, we're not going to tempt many investors to build nuclear power plants when cheaper alternatives are in front of them." Taylor is not someone you'd expect to see dissing nuclear power; his bio on Cato's Web site notes that he is an outspoken critic of federal regulations, environmental "doomsaying," and energy-conservation mandates. But as a strict free-marketeer, he thinks conservatives have "a soft spot in their heads" when it comes to nukes. "If nuclear power can pay for itself over time, then it doesn't need any government help, welfare, subsidy, or anything else," he says. "It seems clear to me that were it not for large and historically important federal subsidies, there wouldn't be a single nuclear power plant in the United States." So can the Bush administration's love affair with the atom persuade investors to ignore the technology's inherent financial liabilities? Most observers don't think so. "Show me the orders for plants," says Sherry. "Show me a utility or an unregulated power producer willing to risk capital of the magnitude we're talking about. I'll believe it when I see it."

The industry refuses to develop plants without subsidies. Chicago Tribune January 20 2005 Nuclear power advocates

make clear that the electric power industry will not pay for new plants. They say the government must subsidize construction costs. "The financial risk is considered too high," said Carl Crawford, a spokesman for Entergy. "It's just too great a risk for any single company." Nustart has already won a commitment of $260 million from the Energy Department to complete plant design, said Marilyn Kray, president of the consortium and an Exelon executive. "Our original request was for $400 million," Kray said. She said the industry needs a subsidy for the first nuclear plants it builds, but would not require taxpayer assistance for the plants that would follow. Adding to the uncertainty of the cost of a new plant is the distinct possibility of cost overruns. For example, CUB said the existing Clinton nuclear plant was supposed to cost $430 million, but it wound up costing 10 times that much.

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Regulation Links The best research proves that reducing emissions would hinder GDP growth, devastating the budget Margo Thorning (American Council for Capital Formation Senior Vice President and Chief Economist, Ph.D) September 1999, http://www.accf.org/publications/reports/sr-ccp-fedbudget99.html A wide range of models predict that reducing U.S. CO2 emissions to either the Kyoto target (7 percent below 1990 emission levels) or even 1990 levels (President Clinton's pre-Kyoto target) would reduce U.S. GDP growth significantly. Research conducted over the past decade for the ACCF Center for Policy Research by top climate change scholars such as Professor Gary W. Yohe of Wesleyan University, Dr. Lawrence M. Horwitz of Primark Decision Economics, Senior Vice President Mary H. Novak of WEFA, Inc., Professor Richard Schmalensee of the Massachusetts Institute of Technology, Professor Alan S. Manne of Stanford University, Dr. Richard Richels of EPRI, Dr. W. David Montgomery of Charles River Associates (CRA), Dr. Joyce Brinner of Standard & Poor's DRI (DRI), and others, concludes that the cost of reducing CO2 emissions in the near term would impose a heavy burden on U.S. households, industry, and agriculture. In addition, the projected federal budget surpluses, which many hope will fund a more secure retirement for the baby boom generation, are imperiled by slow growth in GDP stemming from CO2 emission reductions.

New regulations cut federal revenue Lee Lane (Executive Director Americans for Equitable Climate Solutions) 2003 “Allowance allocation under a carbon cap-and-trade policy,” The Climate Policy Center, www.cpc-inc.org/library/files/19_lanesept03.pdf A large part of the resulting loss in economic welfare is caused by the need to raise taxes to offset the government revenue losses caused by emission controls.* *As explained in the introduction, by reducing short-run economic growth, emission controls decrease government revenue. This lost revenue must eventually be recovered with higher taxes. And higher taxes further retard growth, exacerbating the costs of the program as a whole.

Policies that hurt the economy also hurt the federal budget. Congressional Budget Office November 2002, “Reducing Gasoline Consumption: Three Policy Options”, http://www.cbo.gov/showdoc.cfm?index=3991&sequence=7 Raising the gasoline tax, tightening CAFE standards, or enacting a cap-and-trade program would also affect federal revenue in other, less direct ways. By imposing costs on producers and consumers, all of those policies would tend to discourage economic activity. That decrease in economic activity would lead to lower tax receipts in multiple ways--for example, collections of corporate income taxes would decline if the profits of automakers or gasoline companies fell. The size of those indirect effects on tax collections would vary with the economic cost of the policy adopted. That cost in turn would depend on the targeted reduction in gasoline consumption (bigger reductions would be more costly than smaller ones) and the comprehensiveness of the policy. As discussed in Chapter 2, policies that encourage all gasoline-saving activities will produce a given gasoline reduction at a lower cost than policies that focus on a limited number of activities. Further, for a gasoline tax or a cap-and-trade program, the total cost imposed on the economy would depend on how lawmakers opted to use the revenue from the gasoline tax or from an allowance auction. For example, using those receipts to encourage economic activity (perhaps by reducing taxes on capital or labor) would lead to lower total costs than using those receipts to offset the distributional effects of the policy.

Regulations create the necessity for immense federal spending. Chicago Sun Times August 4 2003 But at the same time the feds are trying to help poor people pay their energy costs, they are also part of the reason energy became so unaffordable in the first place. Environmental regulations act as a big hidden tax on energy, and if some in Congress get their way, these costs are going to balloon in the years ahead. For example, the very same energy legislation that contains the energy assistance increase may also mandate politically correct but expensive wind and solar energy. If this amendment is added to the final bill, it will almost certainly increase electricity costs. Other measures, such as the John McCain (R-Ariz.) and Joe Lieberman (D-Conn.) global warming proposal, would effectively set limits on the use of coal and other fossil fuels. According to the Department of Energy, this measure would add $444 to average annual household energy expenditures when the provisions are fully implemented. If these and other anti-energy measures

become law, many more low-income households will be in need of energy assistance handouts. Even $3.4 billion a year won't be enough. And for the rest of us, who would both have to pay for the assistance and for higher energy costs, it would be a double whammy.

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Emissions Links Attempts to decrease emissions devastate the budget. Margo Thorning (American Council for Capital Formation Senior Vice President and Chief Economist, Ph.D) September 1999, http://www.accf.org/publications/reports/sr-ccp-fedbudget99.html In light of the current debate about how to use the projected federal budget surpluses, policymakers need to consider the potentially large negative impact on GDP growth and federal budget receipts of proposals that address the potential threat of global warming by requiring sharp, near-term cutbacks in CO2 emissions. A report by the Congressional Budget Office (CBO) shows that if economic growth slows relative to the baseline forecast and GDP were 4 percent lower in 2009, the projected on-budget (excluding Social Security contributions) surplus virtually disappears, dropping from $178 billion to only $18 billion (see Figure 2). Similarly, if GDP falls by 3 percent, the surplus declines to $58 billion in 2009 (2009 is the last year of the current CBO forecast). Therefore, implementation of the Kyoto Protocol would make it much more difficult to sustain tax cuts, "save" Social Security, promote the retirement security of the baby boom generation, or achieve other public policy goals, and could require sharp changes in fiscal policy in order to avoid deficit spending.

Reducing emissions would cost the federal budget tens of billions. Margo Thorning (American Council for Capital Formation Senior Vice President and Chief Economist, Ph.D) March 30 2000 “The Impact of the Kyoto Protocol On Economic Growth: Tax Policies to Promote Technology and Sequestration”, http://www.accf.org/pdf/ThorningTestimony.pdf " U.S. Budget Surplus Reduced Sharply. Slower economic growth means that federal tax receipts would be reduced. If implementation of the Kyoto Protocol reduces annual GDP growth by 3 percent per year, for example, the projected budget surplus in 2010 falls from $195 billion to only $57 billion. Meeting the Kyoto emissions targets would make it much more difficult to sustain tax cuts or promote retirement security, and could require sharp changes in fiscal policy to avoid deficit spending.

Mandated cuts in emissions devastates the federal budget. Margo Thorning (American Council for Capital Formation Senior Vice President and Chief Economist, Ph.D) March 30 2000 “The Impact of the Kyoto Protocol On Economic Growth: Tax Policies to Promote Technology and Sequestration”, http://www.accf.org/pdf/ThorningTestimony.pdf In light of the current debate about how to use the projected federal budget surpluses, policymakers need to consider the potentially large negative impact on GDP growth and federal budget receipts of proposals that address the possible threat of global warming by requiring sharp, near-term cutbacks in CO2 emissions. As described above, estimates provided by various academic, private-sector, and EIA modelers show that requiring the United States to reduce CO2 emissions to 7 percent below 1990 levels by 2008–2012 (the EIA projects U.S. CO2 emissions will be about 40 percent above this target by 2010) would reduce GDP growth in the range of 1 to 4 percent per year. Using a simple calculation based on the relationship of increases in GDP to federal tax receipts, if growth falls by 3 percent per year, the projected on-budget surplus in 2010 would decline from $195 billion to $57 billion (see Figure 3). Therefore, implementation of the Kyoto Protocol would make it much more difficult to sustain tax cuts, “save” Social Security, or promote the retirement security of the baby boom generation, and could require sharp changes in fiscal policy in order to avoid deficit spending. These budgetary impacts should be considered as policymakers shape the U.S. response to the potential threat of climate change.

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***Regulations***

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Regulations Reductions would shrink the economy, hamper living standards, crush consumer confidence, and raise electricity prices. Oil & Gas Journal, Margo Thorning, American Council for Capital Formation, Center for Policy Research. December 13, 1999 US consumers suffer declines in wage growth, and the distribution of income worsens under CO[2] stabilization policies. Yohe estimates that reducing emissions to 1990 levels (President Clinton's pre-Kyoto target) would reduce wage growth by 5-10%/year, and the lowest quintile of the population would see its share of the economic "pie" shrink by about 10% (Yohe 1997). Texas A&M University Prof. John Moroney estimates that US living standards would fall by 15% under the Kyoto Protocol compared with the base-case energy forecast (Moroney 1999). US households also face much higher prices for energy under near-term stabilization. A range of estimates by various analysts concludes that prices for gasoline would rise by anywhere from almost 30% to over 50% and that electricity prices would go up by anywhere from 50% to over 80% (Fig. 3). The CEA predictions (a 2.7% increase in gasoline prices and 3.4% higher prices for electricity) are far below those of widely respected climate policy modelers.

Regulations would raise electricity prices, hurting consumers and crushing the job market. Margo Thorning, Ph.D Senior VP and Chief Economist for American Council for Capital Formation. Federal News Service March 31, 2000. Cutting back emissions requires raising energy prices in order to reduce demand. According to most models, U.S. households and businesses would face sharply higher costs for gasoline and electricity. Prices for gasoline under the Kyoto emissions target would increase by as much as 53 percent and electricity prices would increase by 86 percent in the EIA projection (see Figure 5). When Annex I trading is allowed, prices go up a bit less sharply, according to other policy experts. For example, the DRI estimates show a 29 percent price increase for gasoline and a 54 percent increase for electricity prices. Again, the Administration's estimates of cost increases for energy (2.7 percent for gasoline and 3.4 percent for electricity) are far below those of other models, including those of EIA. Impact on Employment, Consumption, Income Distribution, and Living Standards Policies to curb emissions to meet the Kyoto target would have a significant impact on U.S. households' economic well-being and living standards, as well as negatively affect the distribution of income. For example, estimates of job losses range from 1.3 million (Brinner/DRI) to 2.4 million (Novak/WEFA) by 2010. Consumption by U.S. households falls by over 2 percent under the Kyoto emissions target, according to DRI.

Regulations on emissions would lead to a great depression. Thomas Gale Moore, “Global Warming: More Than Hot Air?” June 24, 1998, http://www.cato.org/dailys/6-2498.html, accessed 2/1/03 The Clinton administration had difficulty deciding what it could accept at Kyoto. Its quandary was magnified by the projected failure of the United States to reduce emissions to 1990 levels by the year 2000. Rather than cutting them, a booming economy appears likely to boost emissions of carbon dioxide by at least 15 percent in this decade. Cutting emissions enough to prevent climate change, which might require slashing emissions by some 60 percent, seems out of reach. Avoiding a warmer world would require a radical curbing of emissions by all countries, which in turn would lead to a worldwide slowdown in growth, perhaps even a depression that might make the 1930s look like Disneyland on a good day. The Kyoto agreement is futile. Even Bert Bolin, the former chairman of the United Nations' body of experts on global warming, says that the present plan would, if fully implemented, cut warming a quarter century from now "by less than 0.1 degree C, which would not be detectable." We are plunging into a treaty that creates gigantic obligations without examining its costs and benefits. Congress has demanded that the Clinton administration provide estimates of the costs, but none have been forthcoming.

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Regulations Hurt Small Business Regulations are devastating to small businesses. FDCH Congressional Testimony, Raymond J. Keating, Chief Economist for the Small Business Survival Committee. 4/20/2004 Unfortunately, regulatory costs - including tax compliance - hit small businesses hardest. That was illustrated in a 2001 report by economists W. Mark Crain and Thomas D. Hopkins for the U.S. Small Business Administration's Office of Advocacy. The authors found that the total costs of federal regulations hit $843 billion in 2000, or about 8 percent of GDP.The per employee cost of federal regulations registered $6,975 for firms with fewer than 20 employees, compared to $4,722 for all firms. Tax compliance per employee costs came in at $1,202 for firms with fewer than 20 employees, which was almost double the $665 per employee cost for all businesses.

Regulations hurt small businesses which are key to the economy. Christopher Kenton (President of Cymic) June 18 2003 FDCH Congressional Testimony Finally, with the creation of any regulations, I think we need to explore the differences between large and small businesses, and how regulations may cause unintended consequences. Small businesses provide much of the energy in our economy, driving innovation, and pushing larger businesses to evolve. Small businesses like mine also play important roles in the success of larger businesses by providing critical support services and expertise. While I can see problems--and indeed some abuses-- among large businesses pursuing ever lower costs and higher margins, I think any policies designed to mitigate those abuses should be examined for their impact on small businesses. While larger companies use reduced development costs in global labor markets to improve margins, small companies use the opportunity to innovate in ways that would otherwise require increasingly costly investment capital. If history is any guide, the next major innovation that creates new jobs and a spark in the economy will come from a small business, and it may be one that is able to innovate faster and more effectively by using the global communications infrastructure we've just created.

Regulations hurt small businesses. Investor's Business Daily, September 5, 2003 Perhaps above all, the president's plan is going after job-killing rules. As the chart shows, the burden of government regulations hit small businesses hardest. Cutting them would lead to more jobs.

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Regulations Hurt Consumers Regulations jack consumers Chicago Sun Times August 4 2003 But at the same time the feds are trying to help poor people pay their energy costs, they are also part of the reason energy became so unaffordable in the first place. Environmental regulations act as a big hidden tax on energy, and if some in Congress get their way, these costs are going to balloon in the years ahead. For example, the very same energy legislation that contains the energy assistance increase may also mandate politically correct but expensive wind and solar energy. If this amendment is added to the final bill, it will almost certainly increase electricity costs. Other measures, such as the John McCain (R-Ariz.) and Joe Lieberman (D-Conn.) global warming proposal, would effectively set limits on the use of coal and other fossil fuels. According to the Department of Energy, this measure would add $444 to average annual household energy expenditures when the provisions are fully implemented. If these and other anti-energy measures

become law, many more low-income households will be in need of energy assistance handouts. Even $3.4 billion a year won't be enough. And for the rest of us, who would both have to pay for the assistance and for higher energy costs, it would be a double whammy.

Regulations hurt consumers Jerry Taylor (director of natural resource studies at the Cato Institute) 1/21/2004. CATO Institute. You don't have to be some whiz-bang economist or regulatory specialist to laugh off the claim that consumers "won" when the court decided as it did. All you need is a moment of reflection. Energy efficiency standards, after all, remove products from the marketplace that are deemed "energy inefficient." Accordingly, supporters of the decision are literally arguing that it's "a big victory for consumers" when the federal government prevents consumers from buying products they might otherwise wish to buy — and indeed have bought — for their entire lives. Only in Washington can denying consumers choices in the marketplace be deemed "pro-consumer."

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Regulations Snowball Regulations on fossil fuels snowball. Gannett News Service May 28 2004 In contrast, conservatives charge, Kerry supports costly environmental regulations that could shut down power plants and cost jobs. Kerry's support for reductions in the carbon dioxide emissions that cause global warming is especially dangerous, said Marlo Lewis, a senior fellow for the Competitive Enterprise Institute, a free-market think tank that opposes most federal environmental regulation. Regulating carbon dioxide would be disastrous for the U.S. economy, Lewis said. "All our major fuels -- oil, coal or natural gas -- are carbon based," he said. "So once you start regulating energy production based on carbon, there's no logical stopping point short of total suppression of these fuels."

Carbon Caps would pave the way to more reductions locking the US into other countries’ regulatory demands. Margo Thorning (Senior VP for the American Council for Capitol Formation) June 5 2003 FDCH Congressional Testimony Proponents of carbon emission caps for the utility sector argue that eventually the U.S. will decide to impose carbon caps and that utilities would feel that "safer" about investing if they were told now what the carbon reduction target would be. The argument has several weaknesses. First, imposing carbon caps such as those proposed by Senator Jeffords, which requires a reduction in CO2 in the range of the cut required by the Kyoto Protocol would be just the first step in a series of ever more severe emission reductions (see Figure 1). This agenda was clearly understood by the architects of Kyoto in 1997. For example, Tim Wirth, the former Clinton Administration climate policy negotiator, testified in 1997 that carbon emissions had to be cut by up 10 times the Kyoto target (a 70 percent reduction). The UK has recently announced a target of a 60 perecent reduction by 2050. Adopting a proposal such as S. 366, which requires cuts almost as large as the Kyoto Protocol would increase the pressure on the U.S. from the European Union to adopt the EU's next emission reduction target for the second commitment period. The EU is expected to push for a 60 percent reduc- tion from 1990 emission levels by the year 2050 at the COP 9 meeting later this year in Italy. Thus, even if the U.S. imposes a carbon cap like that in S.366, there can be no certainty those caps will hold in the future and that the goal posts will not be moved back in response to pressure from the EU.

Even small plans targeted at one industry can spillover and effect others Thomas G. Marx (manager in the Public Policy Center for the Global Climate Issue for General Motors Corp) July 1999 The Role of Technology In Responding to Concerns About Global Climate Change, www.accf.org/marx.pdf, accessed 8/27/02 While manufacturing’s dominance of total energy use suggests a reason to focus on that subsector of industry, it is important to note that energy and technology policies directed at one area could have a spillover effect that negatively affects other lower energy-consuming subsectors. While some industries may not consume as much energy or emit as much carbon, policies affecting energy prices and availability may have a disproportionately large effect on them. Some of these smaller energy users can be significant players in economic terms. Thus, wellmeaning energy policies with potentially modest economic impacts in one industrial area could have unintended devastating economic impacts in another. The potential for crosssectoral problems and the difficulty in easily identifying them is inherent in the complexity of the industrial sector.

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Steel 2nc Mandatory emissions reductions crush the steel industry. Heather Villanova 2000 Villanova Environmental Law Review, 11 Vill. Envtl. L.J. 161 The Protocol negatively affects the United States steel industry in two ways: (1) the mandatory reductions make the current coke process economically infeasible and (2) the increase in the cost of energy makes the price of steel rise. These effects economically disadvantage the United States steel industry while benefitting rival steel companies in developing nations, such as China, India, Brazil, and South Korea, because these rival steel companies are not bound to the mandatory regulations of the Protocol. As a consequence of this disadvantage in the international market place, steel production will shift to developing nations. As more production shifts, the more American steel plants will close down and the more jobs will be lost. The Protocol will also cause the steel industry's independent efforts to decrease pollution and invest in energy-saving technology to screech to a halt. The United States steel industry will unjustly take a stronger beating from the Protocol than most other countries. This result is inherently unfair. A. The Protocol's Effect on the Coke Process The coke process includes the burning of coal which produces more carbon dioxide than any other fossil fuel. Coke ovens in the United States have become increasingly more environmentally sound since their invention. These ovens, however, will not meet the Protocol's mandated reductions. In order to satisfy the Protocol, the coke ovens must be equipped with a "filtering process" to eliminate particles from entering into the environment. Improving the filtering process is difficult because it is not technologically possible and, even if it is technologically possible, it is not cost-effective. It is economically infeasible for the steel industry to add such a filtering process because the coke ovens have evolved to a point where new technology would be costly. If the steel industry cannot meet these regulations, it will be penalized either through fines or through verdicts against it in civil suits. Due to its inability to comply with the mandatory regulations, the steel industry's coke process will be shut down. The steel industry's termination of the coke process will devastate the industry in the United States. The coal industry mines coal for two purposes: (1) the production of coke and (2) the production of electricity. If the steel industry no longer produces coke, the coal industry will lose the majority of its business. An alternative to the coke process in the production of steel is the use of scrap metal in mini-mills. Mini-mills, however, do not provide an adequate substitute because: (1) mini-mills have a lower output rate of steel per year; (2) there is a limited amount of scrap metal, an essential ingredient for mini-mills; and (3) mini-mills can produce only limited finished products. For example, mini-mills cannot produce steel for the production of structural members such as i-beams. Since the production of steel requires coke, United States steel companies will have to import coke from other countries. The importation of coke will increase steel production costs and place its foreign competitors even further ahead in the global market place.

The steel industry is key to preserving homeland security and hegemony. Andrew Sharkey (President and CEO of the American Iron and Steel Institute) February 28 2002 http://www.steel.org/news/innews/Andy2_28_02.htm Third, it redefines, and brings into sharper focus, the issue of why a strong and vital domestic steel industry is critical to national security. It does this in two ways. It explains why domestic steel production is important to U.S. defense industries defined broadly, meaning both direct and indirect steel shipments to the military infrastructure needed to support a war effort overseas, plus Federal Government-U.S. steel industry R&D efforts in defense-related areas. And it explains why the domestic steel industry is important to U.S. economic and infrastructure security, including our homeland security, once again defined broadly, meaning steel shipments to U.S. energy security infrastructure, U.S. transportation security infrastructure, U.S. health and public safety infrastructure and U.S. commercial, industrial and institutional buildings.

US hegemony is essential to prevent global nuclear exchange. Zalmay Khalilzad (Analyst at RAND) Spring 1999 The Washington Quarterly Under the third option, the United States would seek to retain global leadership and to preclude the rise of a global rival or a return to multipolarity for the indefinite future. On balance, this is the best long-term guiding principle and vision. Such a vision is desirable not as an end in itself, but because a world in which the United States exercises leadership would have tremendous advantages. First, the global environment would be more open and more receptive to American values -- democracy, free markets, and the rule of law. Second, such a world would have a better chance of dealing cooperatively with the world's major problems, such as nuclear proliferation, threats of regional hegemony by renegade states, and low-level conflicts. Finally, U.S. leadership would help preclude the rise of another hostile global rival, enabling the United States and the world to avoid another global cold or hot war and all the attendant dangers, including a global nuclear exchange. U.S. leadership would therefore be more conducive to global stability than a bipolar or a multipolar balance of power system.

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Steel Key Economy The steel industry is key to the economy and military Bob Taft, Governor of Ohio, September 17, 2001, http://www.steel.org/policy/pdfs/ITCinj_taft.pdf Ohio’s steel makers and steelworkers will be competitive under an open and fair international trading system. On behalf of the people of the State of Ohio, I want to thank you for the opportunity to speak today and encourage you to find in favor of our domestic steel industry and recommend a strong, comprehensive and fair set of remedies. Lastly, although it is beyond the scope of your review, I would like to point out that America’s entire steel industry is in jeopardy and it would be a grave risk to be entirely dependent on other nations for a commodity that is so essential to our economy and our military capability.

The steel industry is key to the US economy William Hawkins, Senior Fellow for National Security Studies at the U.S. Business and Industry Council, January 30, 2002, http://www.tradealert.org/view_art.asp?Prod_ID=205 In his letter calling on the International Trade Commission to investigate, U.S. Trade Representative Robert Zoellick stressed the importance of the issue: "America's steel industry and its more than 200,000 workers play an important role in our nation's economy, providing high-quality products to the manufacturing, construction, and energy sectors." He also framed the problem for the ITC, "The U.S. steel industry has been affected by a 50-year legacy of foreign government intervention in the market and direct financial support of their steel industries The result has been significant excess capacity, inefficient production, and a glut of steel on world markets."

Steel is key to the economy Andrew Sharkey, III, President and CEO of the American Iron and Steel Institute, January 28, 1998, http://www.steel.org/policy/energy/st_980128.asp In any economy, developed or developing, steel is one of the most basic industries. In the United States, steel has an unbroken history of importance, in terms of national security, economic growth and the creation of high-paying jobs. The nation will suffer if the government adopts energy, environmental and other policies that weaken the vitality of its basic industries – including especially steel. The global climate issue entails a grave risk that vital industries like steel would be sacrificed to other policy concerns without adequate justification. There is a strong case for new or enhanced programs for collaborative research into energy conservation and, on a voluntary basis, other means of reducing greenhouse gas emissions.

The steel industry is key to the economy and military Bob Taft, Governor of Ohio, September 17, 2001, http://www.steel.org/policy/pdfs/ITCinj_taft.pdf, Ohio’s steel makers and steelworkers will be competitive under an open and fair international trading system. On behalf of the people of the State of Ohio, I want to thank you for the opportunity to speak today and encourage you to find in favor of our domestic steel industry and recommend a strong, comprehensive and fair set of remedies. Lastly, although it is beyond the scope of your review, I would like to point out that America’s entire steel industry is in jeopardy and it would be a grave risk to be entirely dependent on other nations for a commodity that is so essential to our economy and our military capability.

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Steel Impacts: Military Steel is key to military strength and self-sufficiency Congressman Chris Cannon September 20, 2001, http://www.steel.org/policy/pdfs/ITCinj_cannon.pdf In addition to being a threat to our nation’s economy, our national security is being endangered by foreign steel dumping. During the conflict in the Persian Gulf, the U.S. military relied on equipment made almost exclusively from American steel. First opened in the 1940’s, Geneva was created to supply steel for our national defense. As America now focuses on rebuilding a strong national defense, part of that rebuilding must be to protect the steel industry. If the U.S. steel industry continues to collapse, our Armed Forces will become increasingly dependent upon foreign sources of steel. The terrorist attacks of September 11 clarify the need to ensure that America posses a self-sufficient defense infrastructure. Steel is one of America’s most valuable resources, and the industry is essential to our continued economic and national security.

Steel preserves military industries and the defense infrastructure (1nc) Andrew Sharkey, III, President and CEO of the American Iron and Steel Institute, February 28, 2002, http://www.steel.org/news/innews/Andy2_28_02.htm Third, it redefines, and brings into sharper focus, the issue of why a strong and vital domestic steel industry is critical to national security. It does this in two ways. It explains why domestic steel production is important to U.S. defense industries defined broadly, meaning both direct and indirect steel shipments to the military infrastructure needed to support a war effort overseas, plus Federal Government-U.S. steel industry R&D efforts in defenserelated areas. And it explains why the domestic steel industry is important to U.S. economic and infrastructure security, including our homeland security, once again defined broadly, meaning steel shipments to U.S. energy security infrastructure, U.S. transportation security infrastructure, U.S. health and public safety infrastructure and U.S. commercial, industrial and institutional buildings.

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Steel Impacts: Environment US steel is key to preventing environmental destruction Deseret News, March 28, 2002 Steel producers also are quick to point out that foreign producers operate under fewer environmental regulations and lower labor and legacy costs. "If the U.S. were to lose its domestic steel industry, our global environment would suffer, because more steel would be produced by less environmentally friendly steel producers offshore," the AISI report said.

US steel is the most environmentally benign Paul Wilhelm, President of the US Steel Group, September 16, 1998, http://www.steel.org/policy/environment/st_980918.asp Today, four of the world's ten largest steel producing countries –China, South Korea, Brazil, and Mexico --would not even be subjected to treaty requirements regarding greenhouse gas emissions. Other developing nations, like Argentina, Taiwan, and South Africa also have growing steel capacity. The UN treaty would affect none of these countries either. Carbon emissions per ton of steel produced in these countries already exceed levels found in the developed world. If the Kyoto treaty gives these countries additional cost advantages; it will be "Katie bar the door" from an emissions standpoint. Developed countries like the US, however, would be severely impacted under the terms of the Kyoto Protocol: Hard-won productivity gains the US steel industry has developed over the past fifteen years will be rendered marginal at best; Job opportunities in steel and related industries will be diminished as foreign competition increases and US operating cost soar upward; US industrial competitiveness will be adversely impacted; Trade patterns will shift, but the underlying economic activity will not disappear –the U.S. will simply claim a smaller share of the total pie; and The U.S. manufacturing sector will unavoidably bear the economic brunt of treaty implementation. Although the Administration's economic analysis foresees modest total costs; it fails to appreciate the magnitude of sector-specific disruptions. To illustrate these outcomes, consider the disproportionate impact the Kyoto treaty will likely have on a state like Indiana. More steel is produced in Indiana than any other state in the nation (23.2% of total). On a more regional scale, the Great Lakes states of Indiana, Ohio, Illinois, and Pennsylvania together account for about 53% of total US steel production. US Steel's Gary Works in Gary, Indiana is the largest, most efficient, and technologically advanced integrated steel mill in the nation. It employs close to 7,000 individuals who in 1997 produced almost 7 million tons of raw steel. The WEFA economics consulting group estimates that Indiana would really suffer under the Kyoto treaty. According to WEFA projections for the year 2010, unemployment rates would be about double the base case (i.e., no treaty -- 6.15% vs. 3.65%), manufacturing activity and employment would be about 4% lower, and wages paid to the manufacturing sector will fall commensurately, while tax revenue collections will drop by close to 10 percent. If we superimpose the economic impacts of the Kyoto treaty on a facility like Gary Works, it is not unreasonable to project devastating unemployment, plant job losses in the thousands, and decimation of the local community revenue base. Rather than confront such a bleak future, I would like to offer a more practical suggestion for policymakers to consider as they ponder the future of the global climate issue. This will actually reduce worldwide greenhouse gas emissions, whereas the Kyoto treaty will not. The US steel industry today is the most efficient, most productive, and most environmentally responsible in the world. Labor and management have worked hard and sacrificed along the way to make it that way. If the United States Government is serious about reducing global greenhouse gas emissions, it should recognize that every ton of American steel sold represents a marginal reduction in greenhouse emissions from the international steel industry. Rather than creating new obstacles for the American steel industry, the global climate policy solution may actually lie in helping to ensure our future success.

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Agriculture 2nc Regulations on emissions would crush the competitiveness of the US agriculture industry leading to higher energy costs and food price blips. Margo Thorning (Analyst American Council for Capital Formation, Center for Policy Research) December 13 1999 Oil & Gas Journal US agriculture would also lose competitiveness if the US were to comply with the Kyoto Protocol. A study based on the DRI model by Terry Francl of the American Farm Bureau Federation, Richard Nadler of K. C. Jones Monthly, and Joseph Bast of the Heartland Institute (FNB), predicts that implementation of the protocol would cause higher fuel oil, motor oil, fertilizer, and other farm operating costs (Francl, Nadler, and Bast 1999). This would mean higher consumer food prices and greater demand for public assistance with higher costs. In addition, by increasing the energy costs of farm production in America while leaving them unchanged in developing countries, the Kyoto Protocol would cause US food exports to decline and imports to rise. Reduced efficiency of the world food system could add to a political backlash against free-trade policies at home and abroad. Further, the higher energy costs, notes the FNB analysis, together with the reduced domestic and export

demand, could lead to a very severe decline in investment in agriculture and a sharp increase in farm consolidation. Small farm numbers likely would decline much more rapidly than under baseline conditions, while investment even in larger commercial farms likely would stagnate or decline.

Higher food prices kill billions Tampa Tribune January 20 1996 On a global scale, food supplies - measured by stockpiles of grain - are not abundant. In 1995, world production failed to meet demand for the third consecutive year, said Per Pinstrup-Andersen, director of the International Food Policy Research Institute in Washington, D.C. As a result, grain stockpiles fell from an average of 17 percent of annual consumption in 1994-1995 to 13 percent at the end of the 1995-1996 season, he said. That's troubling, Pinstrup-Andersen noted, since 13 percent is well below the 17 percent the United Nations considers essential to provide a margin of safety in world food security. During the food crisis of the early 1970s, world grain stocks were at 15 percent. "Even if

they are merely blips, higher international prices can hurt poor countries that import a significant portion of their food," he said. "Rising prices can also quickly put food out of reach of the 1.1 billion people in the developing world who live on a dollar a day or less." He also said many people in low-income countries already spend more than half of their income on food.

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Exports Key US Agriculture Exports are Key to the Agriculture Industry. Star Tribune May 18 1999 Former Vice President Walter Mondale told agribusiness leaders Monday that their success and the fate of American farmers hinges on open international markets but the general public doesn't have a broad understanding of that economic reality. Mondale, a former U.S. ambassador to Japan, said the public's support for free trade could wane. "Right now, with the economy doing well, those who are arguing for protectionism are not getting much attention," Mondale said. "But when our economy slows, as it inevitably will, watch out. The voices of retreat will have an audience again." Mondale spoke to about 400 people attending the Pfizer Research Conference at the Minneapolis Convention Center. It was held in conjunction with the American Feed Industry Association convention, and the two events attract scientists, nutritionists and business people from the feed and livestock industries. Americans comprise only 4 percent of the world's consumers. "While our market is big and affluent, the prosperity of American agriculture absolutely depends on open international markets," Mondale said. "This is even more true since the adoption of the last farm bill, which assumes that world markets will underpin farm prosperity. With American farmers under severe economic stress, the cruelest possibility would be the loss of American support for open markets. "

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Agriculture Key Economy The Agriculture industry is key to the economy. Rock Products August 1 2004 Agriculture is the backbone of the economy. Brian Lego, an economist at Economy.com says if crops such as sorghum and corn fall victim to the drought, the cost of animal feed will rise and so will the cost of beef. People will have less money to spend, and the housing market will suffer, Lego says.

Agriculture is key to the economy Journal of Commerce, December 31, 1998 U.S. agriculture prices have reached lows not seen in 10, 20 or even 30 years, while the costs of living, labor and machinery are at record highs. The only thing missing that was present 70 years ago is a stock-market plunge and massive unemployment. If this country continues to allow its agriculture to sink to Depression-era levels, how can it keep the stock market from tumbling, too? Think about the stock market's falling to levels of 30 years ago, say around 700, instead of flirting with 9,000. Impossible? In just over two years, cash grain prices have dropped over 70 percent from the high posted in July 1996. Hog prices also reflect a near-70 percent decline since 1990. Many things have contributed to this dramatic decline of commodity prices. Some have directly benefited the consumer, like lower petroleum prices that were passed on at the gas pump. However, this has not been the case with meats and other commodities in 1997 and 1998. Processors and retailers decided they could increase their margins rather than passing on the savings to the consumer (which would have cleaned up the oversupply). Supplies continue to build, benefiting only processors and retailers, not consumers. Free markets have been stymied. I am not trying to tell you we are heading for a sequel of the Great Depression. But why is the greatest production machine in the world, American agriculture, going through such difficult times? Why should a minority, those who produce the majority of our food, be subjected to cost inflation and price deflation at the same time? U. S. taxpayers coughed up $6 billion dollars this year to help the farmer. Along with next year's Freedom to Farm payments, the extra cash is helping us through the crisis. Thank you, it is just what we needed: another Band-Aid. Government policy for the past 60 years has been to intravenously feed farmers the ""antibiotic'' of farm subsidies and price supports. But the wound has never healed. The Freedom to Farm Act attempts to wean agriculture from subsidies and supports by initiating a ""withdrawal'' process. The problem is, other grain-producing countries around the world don't see it that way. They continue to subsidize their producers. The livestock producer gets no help from taxpayers. But if these prices continue, it is a pretty sure bet the banks holding his notes will get bailed out. We can make our products much more affordable to foreign buyers by devaluing the dollar. But, you say, that will cause inflation. Maybe investors should rethink inflation. Maybe a little inflation is much better than another Depression. If you look at government money-supply figures, it would appear that Washington may have started to print money (which, in hindsight, could have prevented the Great Depression). I hope this is the case. The enormous power of the hedge funds that continuously short commodity futures - the pricing mechanism of the world these days - is staggering. If agriculture dies an economic death, the rest of the economy is sure to follow. It is not too late, but we must act now. Please, help America's farmers sell our products outside our borders. We are dying out here.

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Food Price Impacts Unprecedented low world market food prices are key to global food access Ronald Bailey, science correspondent, May 1, 2000, Reason Time has not been gentle with these prophecies. It's absolutely true that far too many people remain poor and hungry in the world--800 million people are still malnourished and nearly 1.2 billion live on less than a dollar a day--but we have not seen mass starvation around the world in the past three decades. Where we have seen famines, such as in Somalia and Ethiopia, they are invariably the result of war and political instability. Indeed, far from turning brown, the Green Revolution has never been so verdant. Food production has handily outpaced population growth and food today is cheaper and more abundant than ever before. Since 1970, the amount of food per person globally has increased by 26 percent, and as the International Food Policy Research Institute reported in October 1999, "World market prices for wheat, maize, and rice, adjusted for inflation, are the lowest they have been in the last century." According to the World Bank's World Development Report 2000, food production increased by 60 percent b etween 1980 and 1997. At the same time, the amount of land devoted to growing crops has barely increased over the past 30 years, meaning that millions of acres have been spared for nature--acres that would have been plowed down had agricultural productivity lagged the way Ehrlich and others believed it would.

Rising food prices starve one billion and triggers riots and civil disintegration Christian Science Monitor April 3, 1996 If food prices continue to rise, both sides agree, the hardest hit will be the world's poorest billion people, who subsist on less than a dollar a day and for whom continuing price increases could have catastrophic consequences. Behind food shortages and higher prices lies the risk of political instability in poor nations. When prices go up, governments are held accountable. The result could be urban food riots like those that have challenged civil order in countries ranging from Egypt to Zambia.

Global food shortages lead to World War III William Calvin, theoretical neurophysiologist at the University of Washington, Atlantic Monthly, January, The Great Climate Flip-Flop, Vol 281, No. 1, 1998, p. 47-64 The population-crash scenario is surely the most appalling. Plummeting crop yields would cause some powerful countries to try to take over their neighbors or distant lands -- if only because their armies, unpaid and lacking food, would go marauding, both at home and across the borders. The better-organized countries would attempt to use their armies, before they fell apart entirely, to take over countries with significant remaining resources, driving out or starving their inhabitants if not using modern weapons to accomplish the same end: eliminating competitors for the remaining food. This would be a worldwide problem -- and could lead to a Third World War -- but Europe's vulnerability is particularly easy to analyze. The last abrupt cooling, the Younger Dryas, drastically altered Europe's climate as far east as Ukraine. Present-day Europe has more than 650 million people. It has excellent soils, and largely grows its own food. It could no longer do so if it lost the extra warming from the North Atlantic.

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***Café Links***

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Café Hurts Economy Making CAFÉ changes too big, too fast hurts industry Barry Felrice (Senior Manager of Regulatory Affairs for Chrysler) March 8 2002 http://www.heritage.org/Research/EnergyandEnvironment/WM85.cfm Industry needs sufficient lead time if CAFE standards are to change to get a return on our investment in technology. We spent $3 billion on the new 2002 Dodge Rams which included a new assembly plant, a new engine, and a new drive train. We probably will need six to eight years of production to make that money back and get some decent return on it. If CAFE standards change too quickly and are too high, we will have to scrap that investment where we'll lose more money, which is hard to imagine for some of us these days. We can't get to these new levels through technology. When that happens we start cutting back on the least fuel-efficient vehicles which lessens our revenue flow so then we have less revenue to invest in new technology. It's a vicious cycle.

CAFÉ interferes in the economy David Montgomery (Vice President of Charles River Associates) March 8 2002 http://www.heritage.org/Research/EnergyandEnvironment/WM85.cfm The economy is an engine for producing goods and services that consumers want. And what you've heard about so far today is exactly how CAFE standards fundamentally interfere with efficiently allocating the resources we have in order to produce the goods and services that people want. And that means they're going to be a bad idea in terms of how well the economy operates. We need to work through where those inefficiencies in the resource allocation process come from and how large they are. We should also consider other ways we could go about remedying whatever defect in the economy CAFE standards are supposed to remedy but without so much interference the economy.

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CAFÉ Hurt Competitiveness CAFÉ standards hurt the US auto industries’ competitiveness. Andrew Kleit (Professor of Energy and Environmental Economics at Penn State) January 10, 2003 “CAFÉ Changes by the Numbers”. Regulations Magazine. http://www.cato.org/pubs/regulation/regv25n3/v25n3-8.pdf Foreign automakers view the fine as a tax. Thus, BMW and Mercedes-Benz, for example, have routinely paid cafe fines. In contrast, American firms view the standards as binding because their lawyers have advised them that, if they violate cafe, they would be liable for civil damages in stockholder suits. The fear of civil suit is so strong that even Chrysler, which is owned by the German firm Daimler-Benz, will not violate the limits. Because the “shadow tax” of the cafe constraint (the cost of complying with the standards rather than paying the fine) can be much more than $55 per car/mpg, the effects of cafe standards are much larger on U.S. automakers than foreign firms.

CAFÉ standards would bury the US auto industry and place foreign automakers firmly in the lead Andrew Kleit (Professor of Energy and Environmental Economics at Penn State) January 10, 2003 “CAFÉ Changes by the Numbers”. Regulations Magazine. http://www.cato.org/pubs/regulation/regv25n3/v25n3-8.pdf The cafe standards affect the mix of vehicles produced by a manufacturer, but not the overall production of any particular type of car. That is important to remember because, as explained earlier, domestic firms will feel constrained by the new standards but foreign firms will not. The constrained U.S. firms will be forced to increase their fuel efficiency, leaving an undersupply in the large-car market. In turn, foreign firms will move into that market and begin producing vehicles with lower fuel efficiency. Though the cars will have a slightly higher price because of cafe fines, they likely will still appeal to consumers, so the overall mix of cars being sold will not change nearly as much as what cafe proponents expect. Foreign automakers stand to draw a lot of profits away from U.S. firms if stricter cafe standards are adopted. Honda and Toyota, for example, have fleet averages now that likely would satisfy any new standards that Congress might pass, hence the automakers would have no disincentive to try for a larger share of the U.S. large-car market. (In fact, they may feel they need to move into that market because U.S. automakers will be moving into the small-car market.) Even if the foreign automakers’ fleet averages would not satisfy the new standards, the automakers likely would pay the relatively small mileage fines in order to have a larger share of the market.

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CAFÉ Hurt Consumers CAFÉ standards drag down the auto industry and consumers. William A. Niskanen (chairman of CATO) and Peter Van Doren (editor of Regulation Magazine) march 4 2002 “Government Should Steer Clear of the Fuel Economy Issue” http://www.cato.org/dailys/03-04-02.html In contrast to a tax on gasoline, CAFE standards are an imperfect and inefficient method of signaling drivers about the true costs of the gasoline that they consume. First, the standards put a damper on new car sales by increasing vehicle price or reducing size, and they reduce the per-mile cost of using cars because the vehicles use less fuel per mile. The lower sales of new cars means longer retention of existing cars. These older cars pollute more and use more gasoline, undermining the purpose of the CAFE standards. The new cars would use less gasoline per mile, which leads people to drive more. The current best estimate is that every 10% increase in the mpg standard results in a 2% increase in vehicle miles traveled. A second inefficiency of the CAFE standards arises from the interests of the auto unions. The United Auto Workers does not want unionized U.S. auto makers to comply with CAFE by importing small cars that use less gasoline. Under CAFE rules, gas-frugal imports only offset the gasoline use of other imports. To offset the gasoline use of low-mpg U.S. cars, high-mpg cars must be made in the United States, presumably with higher-cost UAW labor that would increase the price to consumers

CAFÉ regulations alienate consumers because automakers must continually mix-shift their products. Andrew Kleit (Professor of Energy and Environmental Economics at Penn State) January 10, 2003 “CAFÉ Changes by the Numbers”. Regulations Magazine. http://www.cato.org/pubs/regulation/regv25n3/v25n3-8.pdf Finally, café standards are, in large part, unworkable because demand can shift much more quickly than a manufacturer’s ability to alter the fuel use of its vehicles. For example, it would take a firm three to five years to re-engineer its cars so that, at current demand levels, the fleet would satisfy a new standard. But consumers can change their buying habits in an extremely short period of time and can buy a mix of cars very different than what automakers expected. Automakers, through no fault of their own, could face short-run cafe problems that they could address only through “mix-shifting” — selling fewer large cars and more small cars by raising prices on the former and lowering them on the latter. Because mix-shifting annoys consumers and reduces industry employment, the government has little choice but to grant the automakers relief, or else the politicians will permit serious unemployment and economic harm.

Café standards would cost consumers almost 2 billion dollars. Andrew Kleit (Professor of Energy and Environmental Economics at Penn State) January 10, 2003 “CAFÉ Changes by the Numbers”. Regulations Magazine. http://www.cato.org/pubs/regulation/regv25n3/v25n3-8.pdf With respect to consumers, losses are measured in terms of the economic concept of “consumer surplus.” For example, assume a consumer values a car for $20,000, and is able to purchase it for $18,000. That consumer would gain $2,000 in consumer surplus. If cafe standards make that car unavailable and the consumer chooses not to purchase a car, the new standards would have caused a loss of $2,000 in consumer surplus for that consumer. If the fuel efficiency standards were to be increased 3 mpg, I estimate that U.S. consumer surplus would decline $1.841 billion.

Increasing CAFÉ standards would severely tax consumers. Energy September 22 2002 In brief, the model results discussed below indicate that a long-run 3.0 MPG increase in the CAFE standard would impose social welfare losses of $ 5.6 billion per year and save 5.1 billion gallons of gasoline per year. This amounts to a hidden tax of $ 1.09 per gallon conserved. An 11 cent per gallon increase in the gasoline tax would save the same amount of fuel at a welfare cost to society of $ 275 million per year. The 3.0 MPG increase is thus 20 times more expensive than the gas tax increase. The marginal welfare costs of long-term increases in the CAFE standard amount to $ 1.26 per gallon and exceed by a factor of five recent estimates of the marginal societal benefits from avoided externalities. Increasing the CAFE standard is therefore neither cost-effective nor costbeneficial. Below is a discussion of just a few elements of the study.

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CAFE Hurt Consumers CAFÉ interferes in the economy David Montgomery (Vice President of Charles River Associates) March 8, 2002, http://www.heritage.org/Research/EnergyandEnvironment/WM85.cfm The economy is an engine for producing goods and services that consumers want. And what you've heard about so far today is exactly how CAFE standards fundamentally interfere with efficiently allocating the resources we have in order to produce the goods and services that people want. And that means they're going to be a bad idea in terms of how well the economy operates. We need to work through where those inefficiencies in the resource allocation process come from and how large they are. We should also consider other ways we could go about remedying whatever defect in the economy CAFE standards are supposed to remedy but without so much interference the economy.

CAFÉ ignores consumer demand David Montgomery (Vice President of Charles River Associates) March 8, 2002, http://www.heritage.org/Research/EnergyandEnvironment/WM85.cfm Manufacturers spend a great deal of time and a great deal of money figuring out how much their customers value certain attributes in order to figure out what package to put together to make as much money as possible when they sell a vehicle. This is not something they do for PR purposes. They do it for purposes of making money. They don't it because they have a cause. Defenders of CAFE don't take into account factors such as acceleration, what's called noise vibration and harshness, towing capacity, about driveability, and other attributes that consumers value. And all of these things tend to be affected adversely by the technologies that are generally proposed for making cars that are cheaper and have greater fuel economy. The one that I like best is front-wheel drive. You know why there are not very many front-wheel drive pickup trucks? Because they can't tow anything and towing is an important attribute for those who purchase trucks. So if we want to pretend that trucks are really cars, then we can impose fuel economy standards that turn them into cars when you are losing something that has a clear, identifiable value in the market place that consumers reveal when they pay something for a vehicle with the characteristics it has today. So these, I think are the costs of CAFE standards.

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CAFÉ Hurts Small Business Small companies will be hurt by fuel efficiency standards Dylan Golden (J.D. candidate at UCLA School of Law) 1999 UCLA Journal of Environmental Law & Policy Following a change in regulations which favored a certain type of equipment (in this case fuel efficient vehicles and machines to build them) companies that have tough to replace equipment, will be in a much worse position than companies that are already poised to upgrade to lower emitting equipment. Smaller competitors may also have trouble overcoming the fixed cost barriers of installing new equipment. It may also discourage companies from entering the market because this type of legislation favors economies of scale. 89 This may explain the recent shift in the auto industry, particularly Ford, towards the support of expenditures for the development of alternative fuel vehicles. Ford has almost fully developed the hydrogen fuel cell and has already introduced the EV1. A tax credit for research and development of alternative power sources may be used by companies like Ford to complete research they would have done anyway, and the credit to individuals who purchase energy efficient cars should stimulate sales of new cars in a market which is increasingly turning to used cars and cutting the profit margins of automobile manufacturers. Automobile manufacturers are also aware of the fact that fossil fuels are a commodity with a limited supply. Within several decades as fossil fuels become more scarce, their price will go up. This will cause a reduction in driving and a decrease in the purchases of new cars as cars will be a less favored means of transportation. Even were this not the case, the glut of used cars on the market provides automobile manufacturers with an additional incentive to change the fuel supply. Like the drivers of diesel cars, current owners of petroleum powered cars may be pressured to upgrade where it is difficult and expensive to procure fuel for their vehicle. The claims of two prominent automobile [*198] industry executives appear to bolster the "business motive" hypothesis: As General Motors Chair and CEO John F. Smith said recently in announcing GM's plans to step up research spending and focus on bringing new products to the market, "no car company will be able to thrive in the 21st century if it relies solely on internal combustion engines." And as William C. Ford, Jr., Chair of Ford's Finance Committee, also said in announcing that Ford will join with Daimler-Benz of Germany in developing cars with fuel-cell engines, "there's a compelling business case to be made."

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CAFÉ Hurt Auto Industry CAFÉ standards would cost the US auto industry over a billion dollars annually. Andrew Kleit (Professor of Energy and Environmental Economics at Penn State) January 10, 2003 “CAFÉ Changes by the Numbers” Regulations Magazine. http://www.cato.org/pubs/regulation/regv25n3/v25n3-8.pdf I found that increasing the cafe standards by 3 mpg would reduce annual profits at General Motors by $433 million, at Ford by $455 million, and at Chrysler by $236 million. Total losses to U.S. automakers would amount to $1.124 billion. In contrast, foreign manufacturers would see an increase in profits of $260 million.

Massive CAFÉ standards would damage the economy to the tune of 9 billion dollars. Andrew Kleit (Professor of Energy and Environmental Economics at Penn State) January 10, 2003 “CAFÉ Changes by the Numbers” Regulations Magazine. http://www.cato.org/pubs/regulation/regv25n3/v25n3-8.pdf Increasing the cafe standards by 50 percent would cause far more harm to the economy. I estimate that passage of the Kerry proposal would have reduced annual profits at General Motors by $3.824 billion, at Ford by $3.423 billion, and at Chrysler by $1.959 billion. Total losses to U.S. automakers would amount to $9.206 billion. In contrast, foreign manufacturers would see an increase in profits of $4.434 billion.

Increasing CAFÉ standards would severely harm the economy. Energy September 22 2002 Tables 5 and 6 present the welfare changes as a result of raising the long-run CAFE standard 3.0 MPG above the 1999 level. As expected, the harm to the economy is greater than that in the previous long-term model. Total producer and consumer welfare losses to society from the MY 1999 equilibrium of raising the long-run CAFE standard 3.0 MPG are $ 3.0 billion. Miles driven rise 1.9 percent from the MY 1999 equilibrium. Emissions of VOCs, NOx, and, carbon monoxide rise between 1.6 to 1.9 percent from the MY 1999 equilibrium. Total externality costs are $ 2.6 billion. Consumption of gasoline is reduced 5.1 billion gallons or 7.1 percent from the MY 1999 equilibrium. The average cost of reducing a gasoline externality is $ 0.58 from the MY 1999 equilibrium including only producer and consumer welfare terms. Including externalities, the average cost of reducing a gasoline externality is $ 1.16.

CAFÉ standards would hurt the auto industry by limiting production and eliminating jobs. The Times October 5 2003 Barthmuss said GM does not want to see federal regulations on fuel economy. GM and United Auto Workers officials have said higher CAFE standards could eliminate jobs in the auto industry because that would raise the cost of building vehicles and production could be cut. "We don't believe a mandated approach to fuel consumption is the right approach," Barthmuss said. "It fails to take in factors like safety equipment (which adds weight to the vehicle) and it takes away from consumer choice."

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CAFÉ Hurt Auto Industry Fuel efficiency unfairly burden domestic car makers because they make more big trucks Southern California and Orange County Real Estate, 2004, http://www.iconocast.com/Economy4_Business22_04/News9.htm Robert A. Lutz, G.M.'s vice chairman, often likens fuel regulations to tackling the nation's problem with obesity by forcing clothing manufacturers to produce smaller sizes. His point is this: As long as gasoline is cheaper than bottled water, fuel economy will not matter to car buyers. G.M. also says fuel regulations unfairly burden domestic automakers because they sell more big trucks.

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CAFÉ Hurts Auto Industry: Transition Cost Regulations on auto emissions will hurt the auto industry Dylan Golden is a J.D. candidate at UCLA School of Law, UCLA Journal of Environmental Law & Policy, 1999 Certain segments of industry have a more direct interest in carbon emissions regulation. Where the production or use of the product itself requires significant carbon emissions the market for the product will likely be hurt as people forego the purchase of the product or find substitutes. Where the government creates incentives, they must be long enough and predictable enough so that firms can count on them when making decisions involving the purchase of long term capital equipment (e.g. land, plant, and equipment). 85 The automobile industry, which is already subject to emissions requirements under CAFE 86 , is a powerful interest which would be seriously impacted by the Clinton proposal. The support of some major American automobile manufacturers for carbon emissions reduction programs, and tax credits in particular, thus comes as a surprise.

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CAFÉ Hurts Auto Industry: Competitiveness CAFE standards hurt competitiveness of US auto industry Paul Roberts, energy expert and writer for Harpers,2004, The End of Oil, pg. 262 Efficiency advocates complain that automakers, especially U.S. auto-makers, have the technology to make even their largest and heaviest SUVs far more fuel-efficient — and should have done so years ago.’ That is undoubtedly true — but consider the economics of the proposition. First, for an automaker to retrofit, say, a fifth of its production lines to build highly fuel-efficient gas-electric hybrids would require the company to reengineer entire assembly lines, develop more efficient and cost-effective hybrid-engine systems, redesign body styles for aerodynamics and weight savings, then retrain thousands of workers and redevelop its network of parts suppliers. All this would could cost billions of dollars, at a time when Detroit is barely holding its own against Japanese rivals that are selling more fuel-efficient cars and thus would have an even greater advantage under tougher CAFE standards. Second, however bad they may be for the climate and energy security, large, inefficient cars have been awfully good for the auto industry. The profit margins on SUVs and trucks are roughly ten times as fat as those for smaller, more fuel-efficient sedans — and are widely credited with having almost singlehandedly kept American carmakers out of bankruptcy court.

Increased CAFÉ standards favors Japanese and German car makers Paul Roberts, energy expert and writer for Harpers,2004, The End of Oil, pg. 296 Yet so far, even that small change has proved to be a political impossibility. Although such efficiency improvements are already technically feasible Ford has a forty-miles-per-gallon gas-electric hybrid SUV in prototype U.S. automakers and the big automotive unions have persuaded Congress not to raise fuel-efficiency standards since the late 198os. Why? Among other reasons, because any regulations requiring greater fuel efficiency will initially favor Japanese and German automakers, whose fleets are already more fuel-efficient thereby costing U.S. companies more of their market share and U.S. auto workers more of their jobs. And such losses are not inconsequential to American politicians. Since 1990, the U.S. transportation industry has made more than $256 million in campaign contributions. Whereas nearly 70 percent has wound up with Republicans, Democrats haven’t been shy about asking for auto dollars, especially from the auto workers’ unions. No surprise that CAFE has never come close to being updated. —

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***Internals***

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Jobs Key Economy Job growth key to re-energizing the economy. Business Week August 9 2004 To be sure, jobs are the key to the consumer outlook. Job growth will have to continue to average about 200,000 workers per month, as it did in the first half. Hiring at that rate will generate the income needed to offset the fading stimulus from past tax cuts and last year's infusion of refinancing money. The good news is that the available labor market indicators for July suggest no slowdown from the first half's solid pace.

Employment drives the economy William Hawkins (Senior Fellow for National Security Studies at the U.S. Business and Industry Council) January 30, 2002, http://www.tradealert.org/view_art.asp?Prod_ID=205 President Bush struck the same note in his State of the Union address, saying. "When America works, America prospers; so my economic security plan can be summed up in one word: jobs." He then stated "the way to create jobs, is to grow the economy by encouraging investment in factories and equipment." But why would any firm build new factories or buy new equipment, if it faced the specter of being driven out of business by imports?

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Small Businesses Key Economy Small businesses create the most jobs and are key to the economy. Public Papers of the Presidents July 19 2004 One of the key components of economic vitality is the small-business sector of America. Now, two points on this. One, most small businesses, just like Lapp Electrical, pay individual income tax rates. A lot of Americans don't know that. This company pays taxes at the individual income tax rate because they are what they call a Subchapter S corporation. Or many small businesses are what they call sole proprietorships; they, too, pay tax at the individual income tax rate. So when you hear me talk about cutting taxes, it is very important for people to connect that to small businesses. Most small businesses pay taxes at the individual income tax rate. Secondly, most new jobs in America are created by small businesses. Therefore, it makes sense to put economic policy in place that stimulates the growth in the small-business sector. If you're interested in creating jobs, if you're interested in people being able to find work--and most new jobs are created by small businesses--it makes sense to have economic policy focus on small businesses. And that's exactly what our tax relief plan did.

Small businesses are key to the economy. Raymond J. Keating (Chief Economist for the Small Business Survival Committee) April 20 2004 FDCH Congressional Testimony The idea that small businesses serve as the backbone of the U.S. economy is not mere rhetoric. It is economic reality. As the U.S. Small Business Administration's Office of Advocacy has noted, small businesses: - account for more than 99 percent of all employers; - employ more than half the private-sector workforce, while creating 60 percent to 80 percent of new jobs each year; - generate 51 percent of private sector output; and - account for 96 percent of all U.S. exporters.

Small businesses are key to the economy. John Snow (Treasury Secretary) September 19 2004 The Main Wire The most powerful elements of our economy today, and historically, are our small-business owners and entrepreneurs, our outstanding workforce and the simple fact that we operate as a free market. These elements have made our economy more open, flexible, adaptive and resilient than any other in the world. These fundamentals should not -- and I believe literally can not -- change if we are to maintain our economic resiliency and dynamism.

Small businesses are the driving force behind the economy U.S. Small Business Administration, 2001, “Small Business Economic Indicators 2000,” http://www.sba.gov/advo/stats/sbei00.pdf Before discussing the year, it is necessary to understand small businesses’ role in the economy.2 Small businesses are a key part of the dynamic in the U.S. business sector. As a group they generate most of the new business entry and firm growth and a significant share of decline and exit. Large businesses, on the other hand, are often mature entities that once were small businesses; this sector tends to provide stability, although changes in individual large businesses can have more far-reaching results. Small firms constituted about three-quarters of the employment growth and 90 percent of the new business location growth in the 1990s (U.S. Census Bureau, Statistics of U.S. Business). With small firms representing most of the growth in the economy, it is not surprising that almost all firms start small, have room to grow, and need to reach a certain level to achieve economies of scale. Large firms are often at the other end of the life cycle. While small firms contribute substantially to the growth of the economy, the small firm share hovers at around half of the private sector economy, as some small firms become large firms and some large firms shrink into small firms.

Small business is the engine of economic growth Nydia Velazquez February 13 2002 Federal Document Clearing House Congressional Testimony We are here today to review the Administration's priorities for this nation's most vital economic engine ---- small business. I need not remind anyone that small business is big business in America, accounting for almost half our GDP --- half our jobs --- and 75 percent of all new jobs created. In a faltering economy, small businesses are especially important to communities struggling with low growth and high unemployment. They hauled us out of recession a decade ago and into the strongest peacetime economy on record. They did it before, and they can do it again, with a little help on our part.

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Small Business Key Economy Small businesses key to the economy Steve Birtman (Director National Federation of American business) May 4 2002 The Tampa Tribune President Bush has proclaimed the week of May 5 as Small Business Week: Where America Works. For

39 years, America has celebrated small businesses as the engine driving our economy, employing more than half of the private-sector work force, while creating three of every four new jobs in America. This coming week, we'll celebrate small business as the thread that sews together the commercial, civic and social fabrics of our society.

Small businesses key to the economy Milwaukee Journal-Sentinel February 19 2002 Small businesses were the growth engine of the economy of the 1990s and continue to be the largest contributor of jobs to the economy. It's evident that in today's economy, we no longer can depend on big business for opportunities.

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Consumer Confidence Key Economy Consumer confidence key to the economy Lawrence Whitman (former director at Heritage) August 14 2002 Web Memo #135. http://www.heritage.org/Research/Regulation/wm135.cfm Confidence on the part of consumers, investors and business owners is an integral part to the economy. And the greater the confidence people have across the spectrum, the greater the chance for economic growth going forward. That's why it's important for the President to hear the views of people, ordinary people as well as CEO's and academics, and for the President to get out in front and lead on this issue, and inspire confidence in people. NACHMAN: So this "feel good" stuff, no matter how ephemeral it is, can be meaningful in the economic reality, correct? WHITMAN: It's not just that it's ephemeral, it's what some economists have called "animal spirit." It's what people perceive about the future as well as the present that effects their behavior now.

Strong consumer confidence prevents small recessionary blips from turning deadly. Farooq Kathwari (Chairman and CEO of Ethan Allen Interiors) march 5 2002 CNBC Well, I must tell you that I have been somewhat pleasantly surprised at the consumer attitudes during this recession. I believe that during the last recession, about 10 years back or even going 20 years back, people who had jobs were also concerned. There were much more concerned than we see today. So while we've had a recession, our sales, for instance, last quarter were down just about four percent from record highs the year before. So, I think we have fared well during the slowdown and I think it's because of the fact that the consumer attitude is much better. That is, those people who have jobs don't think a depression is coming, which was the case, I think, about 20 years back. And I think that attitude has helped us maintain strong consumer confidence or, I would say, stronger consumer confidence and buying. So coming out of this which, I think we are towards the tail end of this recession, I believe we are positioned well as we go forward.

Consumer spending has empirically been key to keeping the economy afloat through tough times. Business Week April 12 2004 As the U.S. has struggled to right itself from the recession of '01, consumer spending has stood out as the one bright spot for the economy. While America's dogged shoppers pulled back in the wake of September 11 and in the runup to last year's Iraq war, overall spending never actually fell. That gave much-needed support to the rest of the economy. Now, consumers once again face obstacles to their free-spending ways -- specifically the painfully slow improvement in the job market, high levels of personal debt, and the pinch consumers would feel if inflation and interest rates were to shoot up. ''Households are pretty stretched,'' says Paul Kasriel, chief economist at Northern Trust Co. in Chicago. ''That's a risk to consumer spending.'' Fueling such concerns: a Mar. 26 Commerce Dept. report that consumer outlays from January to February were essentially flat after stripping out the effects of inflation.

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Business Confidence Key Economy: Stops Recession Recession results when business confidence declines John Braithwaite (Australian Research Council Federation fellow, Australian National University, and chair of the Regulatory Institutions Network) March 2004 The Annals of The American Academy of Political and Social Science, lexis The challenge of designing institutions that simultaneously engender emancipation and hope is addressed within the assumption of economic institutions that are fundamentally capitalist. This contemporary global context gives more force to the hope nexus because we know capitalism thrives on hope. When business confidence collapses, capitalist economies head for recession. This dependence on hope is of quite general import; business leaders must have hope for the future before they will build new

factories; consumers need confidence before they will buy what the factories make; investors need confidence before they will buy shares in the company that builds the factory; bankers need confidence to lend money to build the factory; scientists need confidence to innovate with new technologies in the hope that a capitalist will come along and market their invention. Keynes's ([1936]1981) General Theory of Employment, Interest and Money lamented the theoretical neglect of "animal spirits" of hope ("spontaneous optimism rather than . . . mathematical expectation" (p. 161) in the discipline of economics, a neglect that continues to this day (see also Barbalet 1993).

Business spending is necessary to prevent a slide into recession Business Week September 24 2001 On a positive note, policy actions at home and overseas will help to keep business going. The Federal Reserve announced that it is ready to inject liquidity into the system as needed. The Bank of Japan and the European Central Bank pumped a total of $ 80 billion into their markets. The united front stabilized the dollar after it plunged on the day of the attack. The outlook over the next few quarters, however, will come down to how U.S. consumers and businesses behave. Typically, their response to a crisis has been to freeze. Spending

stops, and decisions about the future are put on hold. If this disengagement lasts only a few days, then the economy will probably soldier on -- still weak, but growing.

Business Confidence key to the economy Lawrence Whitman (former director at Heritage) August 14 2002 Web Memo #135. http://www.heritage.org/Research/Regulation/wm135.cfm Confidence on the part of consumers, investors and business owners is an integral part to the economy. And the greater the confidence people have across the spectrum, the greater the chance for economic growth going forward. That's why it's important for the President to hear the views of people, ordinary people as well as CEO's and academics, and for the President to get out in front and lead on this issue, and inspire confidence in people. NACHMAN: So this "feel good" stuff, no matter how ephemeral it is, can be meaningful in the economic reality, correct? WHITMAN: It's not just that it's ephemeral, it's what some economists have

called "animal spirit." It's what people perceive about the future as well as the present that effects their behavior now.

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Business Confidence Key Economy: Generic Business confidence is critical to the economy Christopher Heye (Nexus Associates Research Director) June 1993 Politics and Society, p. 169 Because it regulates the rate of capital accumulation and the pace of employment growth, the level of business confidence has far-reaching consequences for economic and political activity. Few, if any, economic activities have more substantial social consequences than capital investment. For any economy to grow, resources must be withheld from current consumption and invested in new production facilities in order to provide for the consumption opportunities of tomorrow. Investment expenditures eventually benefit all members of society, producing profits for managers investing in new capital gods as well as employment opportunities for workers required to operate them. Investment outlays also substantially influence the pace of long-run economic growth, the rate of labor productivity, and the ability of firms and nations to compete in the global market-place. In short, sustaining high levels of capital accumulation is critical for any society seeking to improve its overall standard of living.

Business confidence is key to the economy Birmingham Post September 19 2001 With regards to the world of business, we are already talking of a recession and the suffering of many firms and companies. We have been down this path before. Now more than ever, confidence and stability are number one priorities. We must not talk

ourselves into a recession; we must support the business community and seek ways to encourage growth and survival. The cancellation of the Ryder Cup is devastating for the Midlands but equally the reasons for such cancellation are so justified. It is now we need to pick up the pieces, be strong and look towards doubling our success next year.

Business confidence is key to growth Yew-Kang Ng (Professor of Economics University of Melbourne) May 1992 AEP PAPERS AND PROCEEDINGS p. 365 It may be thought that the exit effect is unlikely to occur since firms are unlikely to go bankrupt just on the weight of a collapse in business confidence before real aggregate demand actually decreases substantially. However, in a growing and changing economy, entry and exit take place as a matter of routine. A collapse in confidence will almost certainly speed up exits and delay or stifle planned entries. Thus, the number of firms may be substantially cut as soon as confidence collapses. The entry/exit effect, though classified as a long-run effect for analytical purposes, may take place very quickly, especially if the expected decrease in real aggregate demand is believed to be prolonged.

Business confidence is critical to US economic growth Bank of Montreal International Economic Review, October 31, 2003, p.Lexis Growth in 2004 will be more dependent on rising business confidence. The expansion to date has been hampered by the hesitancy of business to undertake new spending on capital and labour. One of the hallmarks of the high-tech boom last decade was the surge in capital spending and rapid employment growth. Since the bursting of this bubble early in 2000, businesses have been reticent to significantly resume spending in these areas. However, by the end of 2004, the US economy will have averaged growth at or above its

long-run potential rate for seven quarters. As well, the financial situation favors increased capital spending with rising corporate profits, low interest rates and an improving equity market. These factors will be sufficient in our view for businesses to overcome their hesitancy to accelerate spending.

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Business Confidence Key Global Economy Breakdown in business confidence causes capital flight, which wrecks the global economy William A. Lovett (Joseph Merrick Jones Professor of Law and Economics Tulane Law School) 2002 American University International Law Review In some countries, restrictions are appropriate to limit excess capital inflows and inhibit speculative "bubbles." Whether it is possible to engineer limits on capital flight for countries under strain is more doubtful. If business confidence is breaking down, capital

flight and devaluation are hard to avoid. While failing governments normally try to "keep the lid on" a little while longer, these efforts are merely a warning to "head for the exit." The global economy cannot currently support many such naive investors and companies. n100

Business confidence is critical to the global economy Financial Times (London, England) April 18, 2002, p. Lexis However, there are also significant downside risks to the anticipated revival in global activity. The

world economic outlook continues to depend on the prospects for sustained growth in the US, where any setback to business confidence would threaten the expected upturn in investment, and renewed weakness in equity or labour markets would present downside risks to consumption.

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US Key Global Economy US ECONOMIC DOWNTURN WILL CAUSE WORLDWIDE DEPRESSION Financial Post 1999 April 3, 1999 This year, eight economies will be in recession, two in depression. But all should be growing again in the second half of next year, he predicts. Asia is moving toward the beginnings of recovery and is no longer in crisis, in Mr. Sinai's view. South Korea has turned around, from depression to modest growth. Japan seems past the worst, judging by its stock market revival. However, if the U.S. economy falters seriously, so will the fledgling recoveries, Mr. Sinai warns. Asian growth would be stymied. China might devalue, causing new problems for the region. Europe could go into recession. Canada's growth, heavily dependent on exports to the U.S., would disappear. Latin America would fall into depression. All this could lead to financial market collapse, and perhaps a world depression. 'The odds on this are not zero,' Mr. Sinai says.

UNITED STATES FALL WOULD COLLAPSE THE GLOBAL ECONOMY Francesco Sisci 2002, Asia Times, “THE AMERICAN EMPIRE: Part 3: The fear within”, October 18, http://www.atimes.com/atimes/Middle_East/DJ18Ak02.html The implosion or fall of the US would have been bad news not only for Europe, but for the rest of the world. A cowering, wounded United States would have precipitated a global economic downturn, dragging down all emerging markets, China's included, and would have created a huge vacuum of power that no one could fill. This in turn could have brought about chaos for developed and developing nations, with the only benefit going to the ultimate producers of energy and fundamentalist faiths such as Wahhabi Islam. Incidentally, both happen to reside in the same place - Saudi Arabia

The US is key to the world economy New Zealand Herald October 3 2001 In a paper called "Impact of the September 11 events on Developing Countries: A Preliminary Assessment", the World

Bank attributed the downturn to the fact that "the terrorist attacks hit the global economy at a particularly vulnerable moment". The key factor for the world economy is what will happen in the US and, more specifically, whether the continuing interest rate cuts by the Federal Reserve will be sufficient to overcome fears of further terrorist attacks.

US decline brings the rest of the world down Business Week September 24 2001 A U.S. downturn will have repercussions all around the world. With Japan imploding economically, Asia in trouble, and Europe struggling, a recession in the U.S. would remove the last remaining source of demand from the global economy. ''It's like throwing cold water on any prospects for a recovery,'' says Chang Il Hyung, senior vice-president of South Korea's Samsung Electronics Co., the world's largest memory chipmaker. With people around the globe watching the carnage in New York, consumer confidence and business investment could be hit everywhere. ''Since the global economy is interwoven through trade and investment, all of us will be worse off,'' says Sung Won Sohn, chief economist at Wells Fargo & Co.

A US recession would spread worldwide International Herald Tribune January 15 2001 Globalization is a harsh god. It has brought immense new wealth to these Asian nations but it has also forced them to adapt their economies and even their cultural mores to its demands. Even Lee Kuan Yew, the apostle of ''Confucian'' values in Asia, told me that the Internet revolution had forced a new openness and flexibility. ''There is no way we can stop it now,'' he said of this global interconnectedness. ''The problem is how to change, but changing cultures and values is not easy.'' For nearly a decade the world has been able to count on a robust America as the engine of global growth. The rest of the world might suffer periodic crises of confidence, but the American boom continued as if it would last forever. The world began to take American prosperity almost for granted - the perpetual motion machine that allowed everyone else to prosper and grow. The U.S. economic pulse is finally slowing, and people at the

other end of the global nervous system are frightened. The global economy has been built on the illusion of neverending U.S. prosperity. The Asian economies will have to sweat out the sudden American downturn and hope that Dr. Greenspan's magic pills will work.

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US Key Global Economy US recession causes a worldwide economic crash USA Today January 22 2001 Others fear that the USA, now

clearly the world's growth engine, is stumbling at a risky time: Asia is facing a fragile recovery, parts of Latin America are struggling, and Europe may not have the strength to take up the slack. Some experts worry that a U.S. recession at this time could collapse world markets. What's different and what it means: It's a small world The United States and other economies are more tightly interwoven than ever. But make no mistake: The USA dominates. It accounted for 30% of global growth over the past three years, even though its economy represents only 20% of world GDP. "The United States is the big dog. We've been importing a lot of stuff from other countries," says Tim Timken, CEO of Timken Co., a bearing and specialty steel products maker in Canton, Ohio. "If we slow down and the dollar weakens, everybody else in the world can expect big changes." How linked is the world? * Trade accounted for about a fifth of U.S. economic activity a decade ago. Today, it is almost 30%. Exports alone have been responsible for a third of the 20 million jobs created since 1986, the Clinton administration said. * The 2,500 largest U.S. companies sold about 12% of their goods and services outside the USA in 1980. That figure has tripled the past two decades, says Peter Pekar, a consultant with investment-banking firm Houlihan Lokey Howard & Zukin.

The US economy is critical to the global economy Vivek Arora (IMF Senior Resident Representative for Lesotho and South Africa) and Athanasios Vamvakidis (Resident Representative for the IMF in Zagreb, Croatia) October 14 2005 Global Newswire; “Impact of Trading Partners on Each Other’s Growth” Economists usually see the United States as an engine of the world economy: US and world output are closely correlated, and movements in US economic growth appear to influence growth in other countries to a significant degree. Certainly, given its size and close links with the rest of the world, the United States could be expected to have a significant influence on growth in other countries. In 2004, US GDP accounted for over one-fifth of world GDP on a purchasing power parity (PPP) basis and for nearly 30 percent of world nominal GDP at market exchange rates. The United States accounted for nearly a quarter of the expansion in world real GDP during the l990s. World and US growth have moved closely together in recent decades, with a correlation coefficient of over 80 percent. Trade with the United States accounts for a substantial share of total trade in a large number of countries. Estimates of the overall impact of US growth on growth on other countries during the past two decades, in the context of a standard growth model, suggest that US growth is a significant determinant of growth in a large panel of industrial and developing countries, with an effect as large as one-for-one in some cases (Arora and Vamvakidis, 2004). The impact of US growth turns out to be higher than the impact of growth in the rest of the world. This could be explained by the role of the United States as a major global trading partner. The results are robust to changes in the sample, the period considered, and the inclusion of other growth determinants, including common drivers of growth in both the United States and other countries. We also found the impact of US growth on growth in other countries to be larger than that of other major trading partners. For example, the impact of EU growth on the rest of the world is significant but smaller than the impact of US growth.

US is key to the world economy U.S. News & World Report November 24 2003 The global economy is absolutely dependent on the United States. This country carries an annual current-account deficit of $ 481 billion with the rest of the world. Our gross domestic product was more than $ 10 trillion in 2002, greater than the next five countries combined. The success or failure of the American economy is more than important to the rest of the world. The Bush administration may be forced to take further action.

US is key to the world economy. David Westley (Business Features Editor) August 30, 2005, Gulf News, p. Lexis Commented Daniel Hanna, economist at Standard Chartered: "While ten years ago the world's economy was powered by Europe, Japan and the United States, today only the United States survives as a growth engine. "Even China, which is growing rapidly, depends upon the United States to export its goods. Where would products go if the US consumer stopped buying?"

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US Key Global Economy Recession in the US economy leads to global recession. The Washington Times, December 28, 2004, “America becomes global marketplace,” p. Lexis The United States plays another important role as the world's largest market, with free-spending consumers looking for good deals on quality products. U.S. imports of merchandise in 2003 more than doubled those of the second-leading country. Consumers and companies bought $1.3 trillion in goods and an additional $229 billion in services, the WTO says. "The U.S. is the locomotive for global growth. If we were not providing that stimulus, it seems quite possible that the rest of the world economy would slip back into recession," says Kent Hughes, director of the America and the Global Economy Project at the Woodrow Wilson Center.

US economy key to global economy Lawrence Kudlow, economist, THE WASHINGTON TIMES, December 4, 1996 And what's

good for America is good for the rest of the world. U.S. economic policy, its markets, its economy, and its currency, all stand at the epicenter of the global economy. So do our free-market and pro-democracy values. When the United States errs, as it did in the late '60s and '70s, the global economy suffers. When the United States recovers, as it has during the '80s (helped by Britain's Margaret Thatcher) and '90s, so has the wealth of virtually all the other nations.

US economic downturn will cause worldwide depression Financial Post, April 3 1999 This year, eight economies will be in recession, two in depression. But all should be growing again in the second half of next year, he predicts. Asia is moving toward the beginnings of recovery and is no longer in crisis, in Mr. Sinai's view. South Korea has turned around, from depression to modest growth. Japan seems past the worst, judging by its stock market revival. However, if the U.S. economy falters seriously, so will the fledgling recoveries, Mr. Sinai warns. Asian growth would be stymied. China might devalue,

causing new problems for the region. Europe could go into recession. Canada's growth, heavily dependent on exports to the U.S., would disappear. Latin America would fall into depression. All this could lead to financial market collapse, and perhaps a world depression. 'The odds on this are not zero,' Mr. Sinai says.

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***Sector Internals***

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Energy Key Economy The energy sector is vital to our economy. Western Morning News December 4 2003 Renewable energy, particularly windfarms, is making the local news pages at the moment. But what do we mean by renewable energy, and why does the South West Regional Development Agency consider it an important issue? Energy is vital to our modern economy. We need energy to heat and light our homes, to help us travel and to power our businesses. The country's economy has benefited hugely in the past from our country's resources of fossil fuels - coal, oil and gas.

More Evidence The Washington Times October 2 2002 Physical security of power plants is just one component of our overall energy security. Energy is the vital foundation of America's national security and economy, with reliable electricity providing the foundation and spark for our technology-driven society. Nuclear energy is essential to the U.S. economy, providing electricity for one of every five homes and businesses.

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Coal is the basis of the US energy economy Testimony of Dr. Harold Shobert, Director for the Energy Institute @ Penn State. Federal News Service June 8, 2000. In preparing this testimony, I have assumed that others testifying to this Subcommittee today will discuss applications of coal in the electric industry in some detail; so, my own remarks on this topic will be limited. By far the largest market for coal in the United States is electric power generation. Between half and twothirds of our electricity comes from coal-fired plants. As I face a new crop of students each semester, I never cease to be amazed by the number of people who have no idea that coal is the fundamental basis of our energy economy.

Coal is key to our economy via electricity generation. The Detroit News, 1/26/03 Coal is critical to our economy. It provides almost a quarter of all the energy consumed in the United States, primarily for electricity generation. With more than 501 billion tons of proven U.S. reserves, coal will continue to be readily available as an important domestic energy source for at least 400 to 500 years. While coal has a reputation for being a "dirty" fuel, extensive research during the past 30 years has greatly reduced emissions from coal combustion.

Coal is key to the US economy. Power, 4/1/04 Today, for a variety of reasons, U.S. developers are once again increasingly interested in SC plants. Coal is an abundant fuel, and it is crucial for the U.S. economy to maintain a viable coal option. In addition, the big recent increase in the price of natural gas has provided a strong incentive for U.S. utilities to take another look at their plans for coal power plants. Today's need to run plants both efficiently and cleanly is another stimulus of SC plant development. More-efficient plants are not just more competitive because they burn less fuel; they also emit less SOx, NOx, and CO2. Regarding the last gas, a plant's ability to produce power with minimal emissions of greenhouse gases such as CO2 is becoming very significant in view of worldwide agreements to reduce nations' CO2 emissions by 2010. With each 1% efficiency increase, an 800-MW plant produces about 1 million tons less of CO2 over its lifetime.

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Natural Gas Key Economy Natural gas is key to the US economy Rick Boucher (Representative) June 10 2003 Federal News Service Thank you very much, Mr. Chairman. I want to commend you for convening today's hearing on natural gas supply-and-demand concerns. The topic is very timely, given the vital importance of natural gas to our nation's energy portfolio and to our entire national economy. Currently, 23 percent of the United States' primary energy requirements, including industrial, residential, commercial and electric utility sectors, are met through the use of natural gas. According to the Energy Information Administration, the nation's use of natural gas is expected to increase by 52 percent by the year 2025. In recent years, natural gas has proven to be the fuel of choice for electric utilities building new electricity-generating units. This trend is expected to continue, with an estimated 10.4 trillion cubic feet of gas consumption by electricity generators predicted by the year 2025, and that is up from 5.3 trillion cubic feet in the year 2001.

Natural gas is crucial to electricity generation and the economy. Pipeline & Gas Journal April 1 2004 The use of natural gas to create electricity has been good for consumers and should remain an accessible fuel source for electric generators. There are strong economic, efficiency, and environmental reasons to use natural gas in the generation of electricity. Even if, as a nation, we transition to greater reliance on other diverse fuel sources and generation technologies, natural gas will continue to be a necessary backstop. It is therefore essential that the United States take the steps that are necessary to assure an adequate supply.

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Electricity Key to the Economy Cheap electricity is vital to our economy. Policy Papers December 2002 The electricity industry is an important and complex sector of our economy that is central to the lives of Americans. Historically, the U.S. electricity industry developed into a structure of localized monopoly utilities. Each of these monopoly utilities generated electricity to serve consumers in its local area. Within this localized structure, there was limited interaction among different utilities across wide geographic regions. Because of the complex nature of the electricity industry and its historical development, both federal and state entities are involved in overseeing and regulating the industry. Throughout the 1970s and 1980s, a number of events occurred in the electricity industry that began to encourage a shift toward more competitive electricity markets. The Electricity Industry Is An Important and Complex Sector of the U.S. Economy Electricity is central to the lives and livelihoods of all Americans. Annual expenditures on electricity amount to about $224 billion, and electricity is an important input to production in many industries. For example, industrial customers--including companies engaged in manufacturing and assembling products--rely on electricity to power computers, tools, and machinery, as well as for lighting, heating, and cooling their plants and buildings. Similarly, commercial customers--including shopping malls, office buildings, individual stores, and financial and stock markets--also depend heavily on electricity for their day-to-day operations. In addition, residential customers rely on electricity for heating and cooling, lighting, cooking, and cleaning. Finally, with the expansion of Internet usage and the importance of information technologies for commerce, electricity has assumed an even greater role in the daily lives of Americans. As a result, the cost and availability of electricity have implications for the entire economy.

The electricity industry is one of the most important industries to the US economy. John Podesta (former Chief of Staff for Clinton) July/August 2003 Foreign Affairs The electricity distribution system in the United States is perhaps the most underappreciated and vulnerable part of the country's national infrastructure. In this digital age, the need for high-quality, reliable electricity makes the transmission grid almost as vast and as important as the highway system. The electricity business now generates $224 billion a year in revenues, accounting for about four percent of the U.S. GDP. Its value to the economy is multiples of its cost.

Electricity is key to the economy. Pipeline & Gas Journal April 1 2004 Electricity is the backbone of the nation's economy. Advancements in technology have increased U.S. productivity and driven growth, but the technology depends on ever increasing amounts of electricity. As a result, the use of electricity has grown dramatically over the last two decades and mirrors the equally robust growth in gross domestic product (GDP), the gauge of economic health in the United States.

More Evidence Business Wire October 20 2003 "As recent news events have shown, the power generation industry is a critical lifeline for the U.S. economy. Just as businesses rely on power companies to provide reliable, competitively priced electricity, those companies serving the power generation industry rely on scalable, failsafe communications for their operations," SAVVIS President & COO Jack Finlayson said. "With Babcock Power's selection of SAVVIS, Babcock can concentrate on delivering its products and services to its power generation customers while they rely on SAVVIS to manage their communications infrastructure to stringent performance metrics."

Electricity regulations damage the economy. Portland Press Herald January 31 2003 EPA officials in Washington did not immediately return calls seeking a response. But in the past, the administration has said the nation lacks technology for reducing carbon dioxide, so putting limits on the gas would hurt the economy by discouraging power generation and raising electricity costs up to 30 percent.

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Electricity Infrastructure Key Economy Electricity infrastructure is necessary for economic stability. Public Utilities Fortnightly August 1 2004 This electricity infrastructure is at the root of everything in the U.S. economy and society. Everything depends on it. Nothing is separate from it. As the electricity infrastructure goes, so goes the nation. So the key issue to be resolved is: Will the system continue to be the critical infrastructure for the 21st century, or will it be left behind as another industrial relic? I would suggest that the industry and the nation cannot afford to let the latter case be. There is no option. The country will continue to depend, and in fact increasingly depend on its electricity infrastructure. There is no alternative source of electricity that can be plugged into homes or businesses that will in any way provide the resources needed to run this country in the future.

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Auto Industry Key Economy The auto industry is vital to the US economy because of job production PR Newswire September 24 2003 While the automobile industry continues to be America's largest manufacturing industry, the majority of those jobs are in supplier and related industries, with total auto industry and related employment numbering 13.3 million, a new Center for Automotive Research study shows. About 6.6 million jobs are connected to automotive manufacturing and new vehicle sales, generating more than $240 billion in annual private sector compensation. "When you look under the hood of today's automobile, you'll see goods from America's greatest industries across the country," said Alliance President & CEO Josephine S. Cooper. "These include textiles from the Southeast, computer chips from California, aluminum manufactured in Iowa, and air bags produced in Arizona." Cooper continued: "No other single industry is more linked to U.S. manufacturing or generates more retail business and employment. New vehicle production, sales and other jobs related to the use of automobiles are responsible for one out of every 10 jobs in the U.S. economy."

The auto industry keep the American economy afloat. PR Newswire September 24 2003 The auto industry provides among the highest levels of wages and benefits in the private sector, averaging $69,500 in 2001. * The auto industry boasts an added value of $292,000 per worker, 143 percent higher than the overall value-added ratio for U.S. manufacturing ($120,000). * The auto industry invests more in research and development than any other industry -- $18.3 billion in 2000. * The auto industry directly employs 13.3 million Americans in all 50 states. * 2.2 million U.S. workers are employed indirectly by auto industry suppliers and other industry-related companies. * Expenditures of auto industry employees create an additional 3.5 million jobs nationwide.

Messing with the auto industry would devastate the economy by crushing consumer spending and mortgage lenders. CNNMoney.com July 16 2004 Still, Ford raised its earnings guidance for the quarter a month ago, and GM has said that it still anticipates to hit its earlier guidance for earnings growth for the second quarter and the year, and that it is still aiming for strong earnings growth to $10 a share by 2006. Analysts have forecasts at the high ends of both companies' guidance. Why they matter: The U.S. auto industry is still both a key building block of the economy, as well as an excellent indicator of consumer spending. Spending on motor vehicles and parts represented almost a quarter of retail sales last year. Rising interest rates can also hit results at the automakers. Besides increasing the cost of zero-interest financing packages being offered to consumers, rising rates could hurt the nonauto finance business of General Motors Acceptance Corp., one of the nation's largest mortgage lenders. GMAC and Ford Credit have been important drivers of the two companies' profits in recent years.

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***A2: Renewables Turn***

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Renewables Do Not Matter Losing the renewables market doesn’t matter – Denmark proves Graeme Haycroft (founder and General Secretary of the Small Business Union) , July 22 2002 The Courier The Small Business Union, which now competes directly with Commerce Queensland to provide services to other small business employer associations and professional groups, is all about protecting Queensland small business from adverse influences, wherever they may be. Andrew Craig bleats: "Our environmental and renewable energy industries clearly will suffer if excluded from the international scene." Compared to Queensland's mighty coal industry, solar energy is a toy, and, moreover a very expensive toy. Even in draughty Denmark, much-touted wind energy is still unprofitable, according to Herbert Inhabler (TechCentralStation of 11 July 2002), who points out that Denmark remains heavily dependent on coal.

Renewables will never be efficient or a useful market Jack Kemp (Distinguished Fellow at the Competitive Enterprise Institute) July 15 1999 FNS To make that case we have to strike boldly. To leapfrog over the green-eyeshade issue of what the administration is spending "on Kyoto" versus "on idiotic energy policies" we should decisively go after the latter. Over two decades after the Carter administration's costly and failed policies to promote energy sources that have no prospect of market viability (solar, wind, synfuels, biomass, ethanol, etc.), why do we still have programs on the books to subsidize what we know doesn't work? Our policy as a nation should be to encourage technological innovation in the broadest and most sweeping sense, whether in the field of energy or beyond. We don't need corporate welfare programs, public-private partnerships, special-interest tax breaks, or propaganda campaigns to fight what the market tells us: the people want clean, efficient, reliable sources of energy at a reasonable cost. The free market has given them that, and will continue to do so with minimum, prudent regulation. Our energy future is freedom-it's as simple as that. Furthermore, we must pursue a pro-growth, pro-innovation, pro- entrepreneur tax policy that will liberate the imagination of our people to find ways to create jobs, improve productivity, and generate wealth in ways that are even greener, cleaner, and more energy- efficient. That means lower tax rates, reducing the cost of capital, and removing tax considerations wherever possible from the economic decision-making equation, whether it be investment in new equipment, raising venture capital, or a personal decision to invest in stocks as a step towards retirement security. That kind of tax policy has everything to do with Kyoto, because it enthusiastically embraces America's overwhelming competitive advantage: the ingenuity of our people and our business leaders in bringing economic abundance, lower- cost energy, and more efficient energy to the world. Compared with that, the Clinton administration's elitist policy of offering miniscule tax breaks to politically-favored energy producers (like the so-called renewables) looks primitive indeed, whether motivated by Kyoto or not.

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Renewables Transition Blocks Economics Renewable transitions may help some sectors but they send devestating ripple effects throughout the economy and bury the auto industry. Paul Roberts (energy expert and writer for Harpers) 2004 The End of Oil, pg. 270 To divest in any real way from fossil fuels, or at least to change how we use them, will entail enormous changes for companies that produce hydrocarbons, those which consume large quantities of hydrocarbons (such as utilities), and those whose products now burn hydrocarbons (such as auto-makers). True, some players will make the transition profitably — oil companies, for example, are already investing in gas and alternative-energy technologies — but many more will not. In some cases, the failure will stem from a simple lack of capacity to change: the factors that gave a company an advantage in the old energy economy — its technology, its business relationships, the expertise and experience of its work force — may simply not apply in the new energy economy. In many cases, however, companies contemplating a move to the new economy must cope not only with their own weaknesses but with the realization that the new energy economy may not be a very profitable place.

The auto industry is vital to the US economy because of job production PR Newswire September 24 2003 While the automobile industry continues to be America's largest manufacturing industry, the majority of those jobs are in supplier and related industries, with total auto industry and related employment numbering 13.3 million, a new Center for Automotive Research study shows. About 6.6 million jobs are connected to automotive manufacturing and new vehicle sales, generating more than $240 billion in annual private sector compensation. "When you look under the hood of today's automobile, you'll see goods from America's greatest industries across the country," said Alliance President & CEO Josephine S. Cooper. "These include textiles from the Southeast, computer chips from California, aluminum manufactured in Iowa, and air bags produced in Arizona." Cooper continued: "No other single industry is more linked to U.S. manufacturing or generates more retail business and employment. New vehicle production, sales and other jobs related to the use of automobiles are responsible for one out of every 10 jobs in the U.S. economy."

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Renewables Crush Business Confidence Renewable transitions push oil companies out of business and hurt business confidence. Paul Roberts (energy expert and writer for Harpers) 2004 The End of Oil, pg. 264-5 Because asset inertia operates most powerfully in those sectors with the greatest capital outlays, it is a hallmark of the energy business. Consider the worldwide “dash to gas.” One of the main reasons energy companies have been so cautious about investing billions of dollars in new pipelines and LNG facilities is not that they doubt that gas has a future, but that so much of their money is tied up in other, more traditional energy assets, like oil or coal. “Every one of these oil companies wishes it could have a far greater position in gas,” argues Fadel Gheit, senior energy analyst at Fahnestock in New York, “but the fact is that they have existing assets in oil and they just can’t walk away from them. They would go out of business. It’s almost like parents who have boys but wish they had girls.”

Business Confidence key to the economy. Lawrence Whitman (former director at Heritage) August 14 2002 Web Memo #135. http://www.heritage.org/Research/Regulation/wm135.cfm Confidence on the part of consumers, investors and business owners is an integral part to the economy. And the greater the confidence people have across the spectrum, the greater the chance for economic growth going forward. That's why it's important for the President to hear the views of people, ordinary people as well as CEO's and academics, and for the President to get out in front and lead on this issue, and inspire confidence in people. NACHMAN: So this "feel good" stuff, no matter how ephemeral it is, can be meaningful in the economic reality, correct? WHITMAN: It's not just that it's ephemeral, it's what some economists have called "animal spirit." It's what people perceive about the future as well as the present that effects their behavior now.

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Renewables Transitions Expensive The expense of transitions to renewables will bury the economy. Paul Roberts (energy expert and writer for Harpers) 2004 The End of Oil, pg. 287-8 Lacking true economic power, advocates rely instead on persuasion and coercion and often browbeat other energy players into taking action. This has been critical in getting some producers, like BP, to change their policies and practices, but it has led to excesses. Too many advocacy groups, in choosing issues for their publicity potential, exaggerate various energy and environmental calamities and ignore the economic realities of the new energy economy. In the climate debate, for example, environmental groups are among the strongest advocates for making ultradeep cuts in CO2 emissions quickly — even though this approach may be so costly that it ultimately defeats longer-term efforts to reduce emissions. Villains are also often an essential element in most advocates’ rhetoric. Some U.S. and European advocates, for example, say the only reason we don’t have a hydrogen economy now is that automakers and oil companies are wicked and greedy — but these claims conveniently omit any mention of the huge financial risks and engineering uncertainties inherent in shifting to a hydrogen economy. In the same way, some NGOs, in criticizing developing countries for using fossil fuels instead of renewables, ignore the expense of renewables and fail to acknowledge that often the quickest way to alleviate energy poverty is not with a solar panel but with a truckload of stove oil. Notes one expert on world poverty, “Most of the NGOs come from the north — Europe and the U.S. — where energy issues look a lot different, and a lot simpler.”

Renewables waste trillions on transition costs. Frank Murkowski (US Senator, Harvard Journal on Legislation) Summer 2000, 37 Harv. J. on Legis. 345 Third, we must recognize the limitations of our economy and infrastructure to respond to significant policy shifts. The demand for energy facing the world of the twenty-first century will be enormous if we wish to sustain the current standard of living in industrialized nations and extend it to developing countries. We will not be able to meet these energy demands without some use of fossil fuels, and emerging renewable energy technology will continue to require significant market subsidies to be cost competitive. Moreover, nations have invested trillions of dollars in power generation and transmission infrastructure that would need to be retired early if current energy sources are replaced. There are also issues of reliability and availability of energy sources: the wind does not always blow, and the sun is not there to provide solar energy at night when heating is needed. Further, large production capacity for non-hydro renewable energy is not yet available.

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Renewables Can’t Fix Current Economic Problems Short term impacts to companies overwhelm long term economic gains. Paul Roberts (energy expert and writer for Harpers) 2004 The End of Oil, pg. 265 Energy companies are, in other words, limited in how much they can spend building the new energy economy, in part by how much they have already invested in the old one. Whereas many companies believe a hydrogen economy will arrive eventually, they have no clear sense of how to prepare for a hydrogen future, in terms of their assets. How much should a company invest, and where and how soon? In theory, says asset expert Rick Gordon, a farsighted oil company could easily invest today in a mix of new technologies, assets, and expertise that would give it a clear advantage when the hydrogen economy finally emerges. In the meantime, however, the risks to that company would be horrendous, because in preparing to compete in a future hydrogen economy, it would be sacrificing some of its ability to compete in the oil economy today. In fact, such a right-thinking company would in all likelihood never live to see the hydrogen future, but would instead be driven into bankruptcy by its more conservative competitors, all of which were still positioned to succeed in the traditional, hydrocarbon energy economy of the present. “Companies are trying to keep their options open” for new energy sources, Gordon told me, “but without overcommitting to them.”

Even if renewables are ready it takes years for the market to embrace and invest, making economic benefits long-term. Ross Gelbspan (editor and reporter at The Boston Globe and The Washington Post and professor at the Columbia University School of Journalism) 1997 The Heat is On, p. 96 The biggest danger to the U.S. economy, Marvin believes, is not the switch away from fossil fuels. The danger lies more in losing our competitive position as a leading producer of alternative energy technologies to other countries that are now making major investments in them. Wind turbines, for instance, already constitute Denmark’s ninth largest export, while Japanese investment in solar technologies is soaring. Marvin dismisses the assertions of oil and coal lobbyists that renewable energy sources are not yet sufficiently developed to meet the world’s energy needs. “Most forms of renewable energy are already proven,” he says. “But there is a ten-year window between the readiness of the technology itself and the readiness of the market to embrace it. Currently, utilities are skittish because they are still paying off debts from their earlier investments in nuclear plants. Couple that situation with the new deregulation of electric utilities, and there’s a natural reluctance to make big investments in renewable energy sources until the industry sees how the new structure shakes down.” Noting that some photovoltaic facilities now produce electricity at 3.2 cents per kilowatt-hour—a price which is competitive with most utilities— and that large wind installations can produce it for 3 cents—Marvin says the public “should not fear leaving a coal-based economy. It is not nearly as hard as it might seem. It need not be that disruptive to the economy.”

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Renewables Raise Energy Prices Renewables drastically raise the cost of energy. Robert Bradley (president of the Institute for Energy Research, adjunct scholar of the Cato Institute) August 27 1997 Renewable Energy: Not Cheap, Not “Green,” Cato Policy Analysis No. 280, http://www.cato.org/pubs/pas/pa-280.html A multi-billion-dollar government crusade to promote renewable energy for electricity generation, now in its third decade, has resulted in major economic costs and unintended environmental consequences. Even improved new generation renewable capacity is, on

average, twice as expensive as new capacity from the most economical fossil-fuel alternative and triple the cost of surplus electricity. Solar power for bulk generation is substantially more uneconomic than the average; biomass, hydroelectric power, and geothermal projects are less uneconomic. Wind power is the closest to the double-triple rule. The uncompetitiveness of renewable generation explains the emphasis pro-renewable energy lobbyists on both the state and federal levels put on quota requirements, as well as continued or expanded subsidies. Yet every major renewable energy source has drawn criticism from leading environmental groups: hydro for river habitat destruction, wind for avian mortality, solar for desert overdevelopment, biomass for air emissions, and geothermal for depletion and toxic discharges. Current state and federal efforts to restructure the electricity industry are being politicized to foist a new round of involuntary commitments on ratepayers and taxpayers for politically favored renewables, particularly wind and solar. Yet new government subsidies for favored renewable technologies are likely to create few environmental benefits; increase electricity-generation overcapacity in most regions of the United States; raise electricity rates; and create new "environmental pressures," given the extra land and materials (compared with those needed for traditional technologies) it would take to significantly increase the

capacity of wind and solar generation.

Renewables have zero positive effect on competitiveness. If fact, they hurt the economy Robert Bradley, president of the Institute for Energy Research, adjunct scholar of the Cato Institute, Renewable Energy: Not Cheap, Not “Green,” Cato Policy Analysis No. 280, August 27, 1997, http://www.cato.org/pubs/pas/pa-280.html A jobs-creation rationale for wind power is marshaled by supporters, almost as a last line of defense. The American Wind Energy Association trumpets the fact that about $3.5 billion is invested in the U.S. [wind- power] industry, where watt-for-watt, dollar-for-dollar, that investment creates more jobs than any other utility-scale energy source. In 1994, wind turbine and component manufacturers contributed directly to the economies of 44 states, creating thousands of jobs for American communities. The high-cost propensity of wind power is a

negative, not a positive, aspect of the industry. Prices reflect relative scarcity, and the price of wind-power energy is substantially higher than the price of electricity from other sources. Resources devoted to wind power are thus wasted in an economy where wants are greater than the resources available to meet them, and better alternatives are forgone. Without subsidies, less renewable energy infrastructure would have been built and consumers would have had lower cost electricity. The saved resources (land, labor, and capital) would have gone to a more competitive source of electricity or, more likely, given electricity-generation overcapacity, to a different endeavor entirely. Electricity consumers, in turn, would have incremental savings to spend elsewhere in the economy. The result of wind-power investments in California is the existence of an uneconomic renewable energy industry and an underused natural gas infrastructure. Consequently, it has contributed to artificially high rates and a substantial ratepayer surcharge for stranded cost recovery (jargon for generation facilities and third-party contracts incapable of delivering power at competitive prices in a restructured market; utility companies argue that the public should compensate them for those now uneconomic investments) in the restructuring period. Subsidizing renewable energy for its own sake is akin to "creating" jobs by digging holes and filling them back up. The fundamental law of economic efficiency--"employ[ing] the available means in such a way that no want more urgently felt should remain unsatisfied because the means suitable for its attainment were employed for the attainment of a want less urgently felt" --is violated. Proponents of renewable subsidies argue that if the subsidies do not continue, U.S. firms will lose out to foreign firms whose governments will continue to subsidize them. Tax incentives and government grants are sparking new wind-power capacity in a variety of countries. The subsidies have resulted in "many strong European and Japanese competitors in the market place . . . actively marketing products internationally." Concluded the Yergin task force, Continued cost reductions fostered by [DOE's] strategic research, development, and deployment activities can ensure the United States a place in an emerging multibillion-dollar clean energy market. The establishment of footholds by U.S.-based firms in international sales activity is clearly vital. Warnings that foreign companies will replace U.S. renewable energy companies just when commercialization is in sight have been heard since the 1980s --another argument that is wearing thin. Not

surprisingly, however, U.S. companies are finding the best markets abroad where electricity is more scarce and the cost of new power is higher. Whereas almost 80 percent of the world's wind-power capacity was based in the United States in 1990, less than 50 percent is in the United States today. If U.S. subsidies contract, the wind-power industry will likely be a foreignsubsidized experiment rather than a U.S.-subsidized experiment as in the past. Today's renewable export industry is a very small portion of total U.S. energy-related export activities. A $500 million annual renewable export industry accounts for under 1/10 of 1 percent of the total U.S. export market. Unwise and uneconomic subsidies abroad do not justify unwise and uneconomic investments at home. Should foreign subsidies result in major technological breakthroughs to make wind power economically and environmentally viable in niche markets, the United States can "free ride" by importing the technology or equipment, or both. U.S. ratepayers and taxpayers would be spared, and, in fact, U.S. consumers would have been advantageously subsidized by foreign taxpayers or ratepayers.

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Renewables Will Never Be Competitive Renewable energy can never be competitive Global Warming Information Page, March 13, 2000, http://www.globalwarming.org/econup/econ3-1200.html Is alternative energy the panacea that will save us from global warming at no cost? Not according to the Department of Energy. Tom Sarkus, a director at the DOE’s National Energy Technology Laboratory, says that the DOE has received a scanty $1.5 million return on a $1.8 billion investment since the mid-1980s on 40 experimental power projects. He estimates that "one-third of the projects have failed and others just redefined existing technologies or spawned other ideas that do not show up on the DOE’s return" (Greenwire, March 8, 2000). In Europe, alternative energy has not been able to compete since the European Union deregulated electricity markets, leading to a thirty percent decrease in electricity prices. Cogeneration plants – which combine heat and power plants – are under "serious threat of closure" in the Netherlands, according to the World Wildlife Fund. In Germany, 9 cogeneration plants have closed and more are in danger of closure, notes Greenwire.

Renewables are uncompetitive and unuseful Robert Bradley, president of the Institute for Energy Research, adjunct scholar of the Cato Institute, Renewable Energy: Not Cheap, Not “Green,” Cato Policy Analysis No. 280, August 27, 1997, http://www.cato.org/pubs/pas/pa-280.html A multi-billion-dollar government crusade to promote renewable energy for electricity generation, now in its third decade, has resulted in major economic costs and unintended environmental consequences. Even improved new generation renewable capacity is, on average, twice as expensive as new capacity from the most economical fossilfuel alternative and triple the cost of surplus electricity. Solar power for bulk generation is substantially more uneconomic than the average; biomass, hydroelectric power, and geothermal projects are less uneconomic. Wind power is the closest to the double-triple rule. The uncompetitiveness of renewable generation explains the emphasis pro-renewable energy lobbyists on both the state and federal levels put on quota requirements, as well as continued or expanded subsidies. Yet every major renewable energy source has drawn criticism from leading environmental groups: hydro for river habitat destruction, wind for avian mortality, solar for desert overdevelopment, biomass for air emissions, and geothermal for depletion and toxic discharges. Current state and federal efforts to restructure the electricity industry are being politicized to foist a new round of involuntary commitments on ratepayers and taxpayers for politically favored renewables, particularly wind and solar. Yet new government subsidies for favored renewable technologies are likely to create few environmental benefits; increase electricity-generation overcapacity in most regions of the United States; raise electricity rates; and create new "environmental pressures," given the extra land and materials (compared with those needed for traditional technologies) it would take to significantly increase the capacity of wind and solar generation.

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Solar Power Hurts the Economy Solar power is expensive and inefficient Jerry Taylor (director of natural resource studies at the Cato Institute and adjunct scholar at the Institute for Energy Research) and Peter VanDoren (editor of Regulation magazine) Fall 1999 Journal of International Affairs, p. 228-229 In 1987 Scott Skiar, executive director of the Solar Industries Association and the United States’ leading proponent of solar power, told a congressional subcommittee that the “consensus” among energy analysts was that solar power would provide between 10 and 20 percent of America’s energy needs by the year 2000 “quite easily”. As we approach that date, solar provides but one-twentieth of 1 percent of America’s energy needs, but Sklar and his colleagues continue to peddle the same “solar’s around the corner” message to congressional appropriators and the public. The main problem for all solar technologies is cost. Generating electricity via solar power from thermal or photovoltaic (PV) sources, or from micro-applications, costs between 11 and 12 cents per kilowatt hour, at least quadruple the cost of its main competitor today—combined-cycle natural gas—and quadruple the cost of surplus gas-fired electricity in the marketplace. Even those cost figures, however, are understated. According to Solarex, a subsidiary of a partnership between Amoco and Enron and the largest U.S. manufacturer and marketer of PV systems, “using typical borrowing costs and equipment life, the life-cycle cost of PV generated energy generally ranges from 30 cents to $1 per kilowatt hour.” Those high solar costs, according to the California Energy Commission, are related to “problems such as high materials costs, fabrication cost, corrosion, erosion, fatigue, and thermal stress.” Perhaps the greatest economic obstacle to solar power is the problem referred to in the industry as “intermittency”—the fact that the sun doesn’t always shine and thus solar plants are not reliable sources of electricity In fact, a typical plant only operates at 13 percent of its theoretical capacity over a given year.

Solar power can’t provide significant energy on its own and is expensive Robert L. Bradley (president of the Institute for Energy Research) August 27, 1997, http://www.cato.org/pubs/pas/pa-280.html Weighing in at 358 MW nationally, bulk or central-station solar power (power generated at a large-scale centralized location and then transmitted on the power grid to multiple users) represents .05 percent--1/20 of 1 percent--of total U.S. generation capacity. Solar generation of 824 million kWh in 1995 was under 3/100 of 1 percent of national electricity production, one-fourth the size of the tiny wind-power industry (see Appendix, Tables A.2 and A.3). Like wind power's, solar's long-promised commercial viability has not occurred, [161] and potential market share has been grossly overestimated. [162] Solar power is substantially less economic than wind as a central-station power source, although its cost fell from around 25 cents per kWh in the early 1980s to a claimed 8 cents per kWh a decade later. [163] Unlike wind-power capacity, new solar-power capacity is triple the cost of new gas-generated electricity and quadruple the cost of surplus power. Solar power, like most other renewables, is geographically limited for the foreseeable future. In the United States, central-station solar power is limited to the desert Southwest and other selected locales and often involves transmission investments that customsited gas-fired plants can avoid. States such as California and Nevada are swimming in economy energy at 2 cents per kWh, [164] an insurmountable barrier for cost-effective central-station solar under any conditions. Greater potential may exist abroad where power needs are greater (one-third of the world's population remains without electricity), desert areas are more common, electricity is more scarce, and natural gas is not indigenous. Even then, solar power is only a daytime electricity source, and intermittent at that, unless fossil-fuel generation, pumped storage (very expensive), battery storage, or nuclear power provides back-up reliability.

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Wind Power Hurts the Economy Wind powered economy requires huge windfarms and costs trillions Paul Roberts (energy expert and writer for Harpers) 2004 The End of Oil, pg. 205 Predictably, not everyone is so confident in that vision of a renewably powered hydrogen economy. Many veteran alternatives experts, and even some solar advocates, have serious concerns that PV technology cannot improve as quickly as it would need to, to compete effectively in the energy marketplace. They also express considerable anxiety over the sheer scale of a wind- or solar-based energy economy. Although the total wind potential of the planet easily exceeds the world’s projected electrical demand in 2020 — around twenty-six million megawatthours — to produce even 12 percent of that amount will require the construction of more than a million onemegawatt turbines at a cost of some three-quarters of a trillion dollars.

Wind power is inexpensive and unreliable Jerry Taylor (director of natural resource studies at the Cato Institute and adjunct scholar at the Institute for Energy Research) and Peter VanDoren (editor of Regulation magazine) Fall 1999 Journal of International Affairs, p. 229-230 Wind power’s economic potential has long beguiled policymakers and environmental activists. In 1976, the U.S. Department of Energy estimated that wind power could supply about 20 percent of the country’s electricity needs by 1995, a projection echoed by the American Wind Energy Association in congressional hearings in 1984. In 1985 an executive of the American Wind Energy Association told a congressional hearing that an “achievable goal” for the industry was for wind power to be “the lowest-cost source of electricity along with hydro, available to a utility by 1990.” Today, such projections look patently ridiculous. Wind power is only slightly less of an economic white elephant than solar, costing about 7 cents per kilowatt hour once subsidies are factored out of the picture and responsible for only one-fifth of 1 percent of America’s electricity generation. Wind-driven electricity generation from the very best locations is still twice as expensive as combined-cycle natural gas units and triple the price of existing underutilized fossil fuel generation. A conservative estimate of the total federal subsidy for wind power totals $1,200 per installed kilowatt hour of generation capacity. That’s even greater than the direct capital cost of wind power at around $860 per kilowatt hour and far more than installed capacity of fossil fuel generated electricity, such as gas-fired combined cycle plants that cost only $580 per installed kilowatt hour to build. If one converts those numbers to subsidy per kilowatt hour consumed, the aggregated, real price of wind generated power is 10 cents per kilowatt hour. Wind energy’s problems are akin to those found in solar energy production. The wind does not blow around the clock, much less at peak speeds, which means that wind power facilities only operate at about 23 percent maximum capacity even at prime locations. This intermittency problem is a serious obstacle to wind power ever becoming a primary source of electricity.

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Hydrogen Hurts Competitiveness Hydrogen can’t compete economically, even if it is produced from non-renewable sources Paul Roberts (energy expert and writer for Harpers) 2004 The End of Oil, pg. 271-2 Hydrogen, for example, is routinely touted as the inevitable successor to gasoline because hydrogen contains more energy and burns cleanly. But hydrogen also costs about three times as much as gasoline today, and it is not likely to become significantly cheaper anytime soon, even if a global hydrogen fueling system is deployed. According to Joan Ogden, a researcher at the University of California, Davis, and one of the leading analysts in alternativeenergy economics, even when hydrogen is produced in the cheapest way — from natural gas — it still costs about $2.20 for the energy equivalent of a gallon of gas, compared with ninety-five cents for an actual gallon of gasoline. (And Ogden’s studies, it should be noted, were conducted when natural gas prices were relatively low.) Making hydrogen from a renewable source, such as methanol or solar power, is even more expensive. With a cost advantage like that, gasoline has nothing to worry about: hydrogen is not an economic proposition.

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***Answers to Answers***

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A2: Economy Resilient The economy is uniquely prone to collapse due to the budget deficit. Jacob Weisberg (editor of slate) February 2 2006 “Attention! Deficit Disorder”, http://www.slate.com/id/2135751/ Another hazard is losing what Robert E. Rubin, Summers' predecessor as treasury secretary and my guru on this subject, calls "resilience." A deficit of 3.2 percent of GDP, which is what Bush predicts for this year, curtails the ability of policy-makers to respond effectively to the unforeseen and unforeseeable. The U.S. economy was able to absorb the shock of Sept. 11 without falling into recession in part because of Washington's use of fiscal as well as monetary policy in response. But when the budget is already deeply in the red, the "break glass in case of fire" box comes presmashed. In the event of another major terrorist attack or natural disaster, such Keynesian tools as tax cuts and stimulus spending will be much harder to deploy than they were in 2001, when the budget was still in surplus.

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A2: Recession Not Cause Depression The recession caused by the plan will lead to depression. Businessworld January 8 1998 A global recession will make the 1929 depression in the US look like a sari-sari store closing down. Global recession will lay off millions across the planet, triggering a stoppage of production in all types of industries. Industry based-nations with little or no agrarian economy, such as Singapore, will be the first to feel the pitch. Moving out of recession takes time and while the crisis continues, despair will negate further efforts towards growth and induce more crimes and war. A protracted recession will make it harder to get out of it and may cause a depression. A global depression can kill more people in a shorter time than a protracted regional war. An American recession will surely trigger a global recession. The South Korea $50 billion bailout, the biggest ever, bigger than the Mexican bailout, hints how urgent the situation is.

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A2: Economic Checks Governmental checks to stop recessions have disappeared – nothing will stop global meltdown Lester C. Thurow (professor of economics at and former dean of MIT’s Sloan School of Management) 1996 The Future of Capitalism: How Today’s Economic Forces Shape Tomorrow’s World, p. 214 The shift in America's global position has some serious consequences for how severe business cycles will be in the era ahead. Contrast the actions of the early 1980s with what happened a decade later in the aftermath of the 1990-91 recession. For the first time since World War II, there was no American locomotive. The United States did not rush to the rescue with big cuts in interest rates or a huge increase in its fiscal stimulus. Instead it relied on modest cuts in interest rates to engineer a moderate recovery in America. But a moderate American recovery was no longer big enough to pull the rest of the world out of their recessions. To work well, the global capitalistic system as it was designed after World War II needed a dominant economic locomotive--a country that could act to help others improve their economic conditions since it did not have to worry about its own economic condition. But in the first half of the 1990s, the United States was no longer such a country. U.S. policy makers were notably uninterested in aggressively helping the rest of the world recover from their recessions. During and after the 1990-91 recession, America's antirecessionary interest rate cuts were modest, no fiscal stimulus was applied, and its interest rates were pushed back up long before it was appropriate from the perspective of the rest of the world given their weak to nonexistent recoveries. The change in America's willingness to adopt policies that would help the rest of the world was dramatic, since there were no domestic excuses for its unwillingness to act more aggressively. American inflation was both low and falling. Before, America had

always been willing to help end world recessions even at some cost to itself. Now it was unwilling to help even when there were no costs to itself. Without an American global economic locomotive, recessionary recoveries were very slow in Europe and Japan. Europe's postrecessionary recovery was better than that of Japan but still not strong enough to eliminate persistent, and what increasingly looked like permanent, double-digit unemployment rates. With an anemic 2.1 percent growth rate in 1994, unemployment rates were still rising in most of Europe. Technically, recessions officially end with two quarters of positive growth, but what might be defined as a real recovery (falling unemployment) was not in sight. Some European countries such as Finland and Sweden were not expected to return to 1990 GDP levels until 1996. Europe found that it could not use lower interest rates to stimulate growth, since Germany's high interest rate policy (designed to fight inflation flowing from the integration with East Germany and to attract capital investment into East Germany) imprisoned everyone else's monetary policies. Germany essentially became a sea anchor preventing rapid recovery. Eventually Italy and Britain could not hold out and in the summer of 1992 were forced to cut themselves loose from the D-mark zone and substantially devalue. That allowed them to lower their interest rates, and with lower interest rates and lower costs due to devalued currencies, their growth accelerated, but most of Europe hung on to D-mark parity, high interest rates, and slow growth. What the United Kingdom and Italy gained, the rest of Europe probably lost. The Germans simply were unwilling to replace the American global locomotive with a regional European economic locomotive. Without a global or a regional locomotive, in the mid-1990s Europe suffers from double-digit unemployment, has been operating at or very near those high levels of unemployment for almost a decade, and no one expects to do much better in the foreseeable future. National countercyclical Keynesian stimulus policies have simply disappeared. In the aftermath of the 1990-91 recession, only Japan and the United States reduced interest rates to stimulate demand and no country even attempted countercyclical fiscal policies--tax cuts or expenditure increases. In the summer of 1992 just when they should have been stimulating their economies, Italy, France, and the United Kingdom were all raising interest rates to defend their currencies. Inaction can be explained by some combination of fears

of inflation, an inability to control structural budget deficits, and the growth of a global economy where onecountry Keynesian policies have become impossible. But the bottom line was inaction.

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***Impacts***

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Economy First Short term economic impacts destroy the chances to solve long term. Your plan will be rolled back John E. Brandenburg and Monica Rix Paxon (physicist rocket scientist, Mars expert, investigator on MET project, NASA technical advisor, former member of space transport subcommittee) 1999 Dying Earth, p.248 - 249 If we are to have any hope of avoiding famine and economic chaos, we need a solution which maintains a strong economy, because economic pain is real pain, It puts people out of work, it kills hope, it destroys families and health. Equally damaging, it kills the possibility of commitment to an energy transition. Underfed, underpaid, cold humans will tend to choose short-term comfort over longer-term solutions, even those which might bring a warmer, more prosperous future. So, those who speak glibly of revamping the economy to use drastically less energy are a bit like those who minimize the effects of global warming—they either lack imagination or simply misunderstand the human condition. This is not an argument against conservation and greater efficiencies, both of which will help delay the effects of fossil fuels, create profits for companies and savings for everyone in the process. However, ultimately, as a single strategy, limiting energy use leads to a dead-end when

growing populations or expanding economies exceed the net energy benefit from any conservation or energyefficiency gains. Therefore, unless we can enforce limits on population and growth, as a bottom line we will need a vast new source of power and fuel, and if the majority of our efforts have been placed just on conservation, we may fail to come up with the alternatives we so desperately need.

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Global Economy Impacts (Mead) Economic decline causes global nuclear war Mead 92 [Walter Russel, fellow, Council on Foreign Relations, New perspectives quarterly, summer pp. 28] What if the global economy stagnates - or even shrinks? In that case, we will face a new period of international conflict: South against North, rich against poor. Russia, China, India - these countries with their billions of people and their nuclear weapons will pose a much greater danger to world order than Germany and Japan did in the '30s. But what if it can't?

Economic collapse cause global nuclear war Mead 98 Los Angeles Times August 23,” ECONOMY;MARKETS BIGGEST THREAT TO PEACE” Even with stock markets tottering around the world, the president and the Congress seem determined to spend the next six months arguing about dress stains. Too bad. The United States and the world are facing what could grow into the greatest threat to world peace in 60 years. Forget suicide car bombers and Afghan fanatics. It's the financial markets, not the terrorist training camps that pose the biggest immediate threat to world peace. How can this be? Think about the mother of all global meltdowns: the Great Depression that started in 1929. U.S. stocks began to collapse in October, staged a rally, then the market headed south big time. At the bottom, the Dow Jones industrial average had lost 90% of its value. Wages plummeted, thousands of banks and brokerages went bankrupt, millions of people lost their jobs. There were similar horror stories worldwide. But the biggest impact of the Depression on the United States--and on world history--wasn't money. It was blood: World War II, to be exact. The Depression brought Adolf Hitler to power in Germany, undermined the ability of moderates to oppose Joseph Stalin's power in Russia, and convinced the Japanese military that the country had no choice but to build an Asian empire, even if that meant war with the United States and Britain. That's the thing about depressions. They aren't just bad for your 401(k). Let the world economy crash far enough, and the rules change. We stop playing "The Price is Right" and start up a new round of "Saving Private Ryan."

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U.S. Collapse Sparks U.S.-China War (Mead) US economic collapse will ensure a US-China war Mead 2004 (Walter Russell- Senior Fellow at Council on Foreign Relations, “America's STICKY Power,” Foreign Policy) Similarly, in the last 60 years, as foreigners have acquired a greater value in the United States-government and private bonds, direct and portfolio private investments-more and more of them have acquired an interest in maintaining the strength of the U.S.-led system. A collapse of the U.S. economy and the ruin of the dollar would do more than dent the prosperity of the United States. Without their best customer, countries including China and Japan would fall into depressions. The financial strength of every country would be severely shaken should the United States collapse. Under those circumstances, debt becomes a strength, not a weakness, and other countries fear to break with the United States because they need its market and own its securities. Of course, pressed too far, a large national debt can turn from a source of strength to a crippling liability, and the United States must continue to justify other countries' faith by maintaining its long-term record of meeting its financial obligations. But, like Samson in the temple of the Philistines, a collapsing U.S. economy would inflict enormous, unacceptable damage on the rest of the world. That is sticky power with a vengeance. The United States' global economic might is therefore not simply, to use Nye's formulations, hard power that compels others or soft power that attracts the rest of the world. Certainly, the U.S. economic system provides the United States with the prosperity needed to underwrite its security strategy, but it also encourages other countries to accept U.S. leadership. U.S. economic might is sticky power. How will sticky power help the United States address today's challenges? One pressing need is to ensure that Iraq's econome reconstruction integrates the nation more firmly in the global economy. Countries with open economies develop powerful trade-oriented businesses; the leaders of these businesses can promote economic policies that respect property rights, democracy, and the rule of law. Such leaders also lobby governments to avoid the isolation that characterized Iraq and Libya under economic sanctions. And looking beyond Iraq, the allure of access to Western capital and global markets is one of the few forces protecting the rule of law from even further erosion in Russia. China's rise to global prominence will offer a key test case for sticky power. As China develops economically, it should gain wealth that could support a military rivaling that of the United States; China is also gaining political influence in the world. Some analysts in both China and the United States believe that the laws of history mean that Chinese power will someday clash with the reigning U.S. power. Sticky power offers a way out. China benefits from participating in the U.S. economic system and integrating itself into the global economy. Between 1970 and 2003, China's gross domestic product grew from an estimated $106 billion to more than $1.3 trillion. By 2003, an estimated $450 billion of foreign money had flowed into the Chinese economy. Moreover, China is becoming increasingly dependent on both imports and exports to keep its economy (and its military machine) going. Hostilities between the United States and China would cripple China's industry, and cut off supplies of oil and other key commodities. Sticky power works both ways, though. If China cannot afford war with the United States, the United States will have an increasingly hard time breaking off commercial relations with China. In an era of weapons of mass destruction, this mutual dependence is probably good for both sides. Sticky power did not prevent World War I, but economic interdependence runs deeper now; as a result, the "inevitable" U.S.-Chinese conflict is less likely to occur.

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US Credit Liquidation (Bailey) CREDIT LIQUIDATION MEANS EXTINCTION *we do not endorse the original gendered language of this card Norman Bailey 1990 (Senior director of International Economic Affairs) The World and I, The thirties, after all, began three months after the inception of the Great Depression arid ended four months after the start of World War II. This was not a coincidence. Tens of millions were killed and maimed in the Second World War. If another historical credit liquidation cycle is allowed to take place in the usual chaotic fashion the chances of another global armed conflict will be greatly increased-this time not only would hundreds of millions (rather than tens of millions) be killed or wounded, but the very hopes and the future of [hu]mankind*.

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Global Economy Impacts (Lopez) GLOBAL RECESSION WOULD RESULT IN A CATASTROPHIC EXPLOSION OF CONFLICTS, FOOD RIOTS, ARMS RACES AND FULL-BLOWN WARS. Bernardo V. Lopez BusinessWorld 9/10/1998, HEADLINE: Global recession phase two: Catastrophic (Private sector views) What would it be like if global recession becomes full bloom? The results will be catastrophic. Certainly, global recession will spawn wars of all kinds. Ethnic wars can easily escalate in the grapple for dwindling food stocks as in India-PakistanAfghanistan, Yugoslavia, Ethiopia-Eritrea, Indonesia. Regional conflicts in key flashpoints can easily erupt such as in the Middle East, Korea, and Taiwan. In the Philippines, as in some Latin American countries, splintered insurgency forces may take advantage of the economic drought to regroup and reemerge in the countryside. Unemployment worldwide will be in the billions. Famine can be triggered in key Third World nations with India, North Korea, Ethiopia and other African countries as first candidates. Food riots and the breakdown of law and order are possibilities. Global recession will see the deferment of globalization, the shrinking of international trade - especially of high-technology commodities such as in the computer, telecommunications, electronic and automotive industries. There will be a return to basics with food security being a prime concern of all governments, over industrialization and trade expansions. Protectionism will reemerge and trade liberalization will suffer a big setback. The WTO-GATT may have to redefine its provisions to adjust to the changing times. Even the World Bank-IMF consortium will experience continued crisis in dealing with financial hemorrhages. There will not be enough funds to rescue ailing economies. A few will get a windfall from the disaster with the erratic movement in world prices of basic goods. But the majority, especially the small and medium enterprises (SMEs), will suffer serious shrinkage. Mega-mergers and acquisitions will rock the corporate landscape. Capital markets will shrink and credit crisis and spiralling interest rates will spread internationally. And environmental advocacy will be shelved in the name of survival. Domestic markets will flourish but only on basic commodities. The focus of enterprise will shift into basic goods in the medium term. Agrarian economies are at an advantage since they are the food producers. Highly industrialized nations will be more affected by the recession. Technologies will concentrate on servicing domestic markets and the agrarian economy will be the first to regrow. The setback on research and development and high-end technologies will be compensated in its eventual focus on agrarian activity. A return to the rural areas will decongest the big cities and the ensuing real estate glut will send prices tumbling down. Tourism and travel will regress by a decade and airlines worldwide will need rescue. Among the indigenous communities and agrarian peasantry, many will shift back to prehistoric subsistence economy. But there will be a more crowded upland situation as lowlanders seek more lands for production. The current crisis for land of indigenous communities will worsen. Land conflicts will increase with the indigenous communities who have nowhere else to go either being massacred in armed conflicts or dying of starvation. Backyard gardens will be precious and home-based food production will flourish. As unemployment expands, labor will shift to self-reliant microenterprises if the little capital available can be sourced. In the past, the US could afford amnesty for millions of illegal migrants because of its resilient economy. But with unemployment increasing, the US will be forced to clamp down on a reemerging illegal migration which will increase rapidly. Unemployment in the US will be the hardest to cope with since it may have very little capability for subsistence economy and its agrarian base is automated and controlled by a few. The riots and looting of stores in New York City in the late '70s because of a state-wide brownout hint of the type of anarchy in the cities. Such looting in this most affluent nation is not impossible. The weapons industry may also grow rapidly because of the ensuing wars. Arms escalation will have primacy over food production if wars escalate. The US will

depend increasingly on weapons exports to nurse its economy back to health. This will further induce wars and conflicts which will aggravate US recession rather than solve it. The US may depend more and more on the use of force and its superiority to get its ways internationally.

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Global Economy Impacts (Lewis) ECONOMIC COLLAPSE CAUSES NUCLEAR WAR Lewis 1998 (Chris H., environmental historian, University of Colorado-Boulder, THE COMING AGE OF SCARCITY, p. 56) Most critics would argue, probably correctly, that instead of allowing underdeveloped countries to withdraw from the global economy and undermine the economies of the developed world, the United States, Europe, Japan, and others will fight neocolonial wars to force these countries to remain within this collapsing global economy. These neocolonial wars will result in mass death, suffering, and even regional nuclear wars. If First World countries choose military confrontation and political repression to maintain the global economy, then we may see mass death and genocide on a global scale that will make the deaths of World War II pale in comparison. However, these neocolonial wars, fought to maintain the developed nations' economic and political hegemony, will cause the final collapse of our global industrial civilization. These wars will so damage the complex economic and trading networks and squander material, biological, and energy resources that they will undermine the global economy and its ability to support the earth's 6 to 8 billion people. This would be the worst-case scenario for the collapse of global civilization.

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Economic Decline Impacts Economic depression kills through food prices, outweighing war Ellwood 03 Charles Ellwood, University of Missouri. "Sociology and Modern Social Problems" http://www.nalanda.nitc.ac.in/resources/english/etext-project/sociology/sociology/chapter9.html As already implied, then, economic depression exercises a very considerable influence upon death rate, particularly when economic depression causes very high prices for the necessities of life and even widespread scarcity of food. This cause produces far more deaths in modern nations than war. The doubling of the price of bread in any civilized country would be a far greater calamity than a great war. While modern civilized peoples fear famine but little, there are many classes in the great industrial nations that live upon such a narrow margin of existence that the slightest increase in the cost of the necessities of life means practically the same as a famine to these classes. Statistics, therefore, of all modern countries, and particularly of all great cities, show an enormous increase in sickness and death among the poorer classes in times of economic depression.

Economic decline undermines solutions to ecology, diseases, famine, oppression Silk 93 Leonard Silk Winter 1993 (prof. of economics @ Pace U.), Foreign Affairs, Dangers of Slow Growth Like the Great Depression, the current economic slump has fanned the fires of nationalist, ethnic and religious hatred around the world. Economic hardship is not the only cause of these social and political pathologies, but it aggravates all of them, and in turn they feed back on economic development. They also undermine efforts to deal with such global problems as environmental pollution, the production and trafficking of drugs, crime, sickness, famine, AIDS and other plagues. Growth will not solve all of these problems by itself. But economic growth – and growth alone – creates the additional resources that make it possible to achieve such fundamental goals as higher living standards, national and collective security, a healthier environment, and more liberal and open economies and societies.

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Stock Market Collapse Impacts Stock market collapse will cause global economic decline and destroy US Hegemony Mead 98 Los Angeles Times August 23,” ECONOMY;MARKETS BIGGEST THREAT TO PEACE” The global economic crisis of 1997-98 is indeed a historic event. If there were an Economics Channel as there is a Weather Channel, frenetic newscasters would be interrupting regular programming right now to give us hourly updates on something they would be calling the storm of the century, an economic cataclysm as big as or bigger than the Great Depression of the thirties. The behavior of economic storms is as hard to predict as the course of a hurricane. Still, this storm already has a track record, and it's pretty damned chilling. If, God forbid, it reaches the United States, watch out. In a blow like this, stock prices could easily fall by two thirds--that's 6,000 points on the Dow--and it could take stocks a decade or more to recover. Many investors could be destroyed; mass liquidation of mutual funds in a panic could wipe out some funds entirely. The carnage among "growth" funds and such highflying sectors as Internet and technology companies would be appalling. In a real meltdown, the damage wouldn't be limited to the financial markets. Housing prices would plummet, leaving millions of highly leveraged home and apartment owners sitting on mortgages that are worth far more than their homes. Millions of people would lose their jobs, and tens of millions more would watch their wages drop as employers frantically tried to cut back their payrolls. Many cities would face bankruptcy as their tax revenues collapsed. All these things and more have already happened in many countries around the world. Thailand, Indonesia, Malaysia, South Korea, Japan, Vietnam, Russia, South Africa--stock markets in these countries have fallen by as much as 90 percent, unemployment rates are exploding, and countless people face the loss of their businesses, jobs, and homes. Even starvation. Short of a massive asteroid strike from outer space, no natural disaster could destroy this much wealth or plunge this many people into misery. And more than a year after the crisis began, not one country where it has struck shows any signs of recovery. With Japan, the world's second-largest economy, and Russia, its second-largest nuclear power, firmly in its grip, the economic crisis now sweeping the planet may be the most important event-and the most dangerous--since the Second World War. This isn't just an economic meltdown in a few emerging markets. It's a full-fledged crisis of the international economic system, one that could plunge the entire world into a major depression. More than that, it could challenge the strength of the international political system and test the leadership of the country that widely and imprudently bills itself as "the only global superpower." Well, the only global superpower has recently made some very stupid mistakes. We put our confidence in two basic ideas that turned out to be wrong. The first is that rapid deregulation of the international financial system would promote growth without creating dangerous financial crises. The second idea is that the export-oriented development model pioneered by Japan, Taiwan, and South Korea would keep working forever. In fact, that economic strategy hit a wall ten years ago, and Japan's economy hasn't grown since. Now the problems have spread to the rest of Asia, halting the tigers in their tracks. Under presidents Bush and Clinton, the United States has been the leading advocate of deregulating the global economy and reducing the barriers to investment and trade.

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Unemployment Impacts High levels of unemployment risk nuclear war Mead 1994 (Walter Russell- Senior Fellow at Council on Foreign Relations, “ECONOMIC POLICY INSTITUTE SEMINAR AND NEWS CONFERENCE REGARDING G-7 JOBS CONFERENCE IN DETROIT,” Federal News Service, Mar 11) Okay, well, as I listened to people talk this morning, I was very happy to hear that we're saying that unemployment is more than a national problem and more than a simple economic problem, that the question of mass unemployment concentrated primarily among younger people and having an inevitable consequence of falling wages and work opportunities for the general population is also, in the long run, a threat to the democratic legitimacy of Western governments. This is not simply a technocratic, economic problem that we want to adjust 2 percent here or 1 percent there. This really goes to the heart of the question of the long-term survival of a lot of the values that we have and a lot of the institutions that we care about. I'd like to add to that that unemployment is not unrelated to the question of world peace. We've had today hanging over us a couple of times mentions of hundreds of millions of people in developing countries who would like to join the advanced industrial democracies in their standards of living. We've spoken of the former communist states of Europe, all of whom are looking for a place at this table. Our modern economic system originated after the second world war with some very important insights, where people looked at why did the world get into World War II. And a big answer was the mass unemployment of the '30s that led to fascism, that led to a climate of international confrontation, and ultimately led to war. And the idea that full employment was central to concept of building peace after the second world war. Today we tend to say that if you can get full employment at all it will follow free trade, if you -- you know, except for low interest rates and GATT there is essentially no Western program today for jobs. This is putting the cart before the horse in the view of the people who sort of originally designed the postwar system, where they said that free trade was actually a consequence of full employment rather than a cause of it. And I think you can still see that in that the ink is hardly dry on the Uruguay Round agreement when the United States and Japan are firing opening volleys in a trade war. So we are talking about the viability of our democratic systems of government and we are talking about world peace when we are talking about unemployment. What is so interesting is the -- and alarming, is the enormous gap between the gravity and intractability of the problem and the very small scale measures being proposed to deal with it. I suspect that we will see out of this job conference a very few recommendations coming forward on improving the efficiency of labor, sort of marginal improvements, and there will be essentially a throwing up of the hands in despair about this thing. All of us have spoken more or less this morning about the need for some kind of G-7 cooperation, international cooperation here. We've been talking about this for a long time, really since the Bretton Woods system broke down in the early 1970s. There have been a whole series of efforts to create some kind of international economic cooperation among the leading economies, and they have generally ended either in disaster or in platitude -- sometimes in both. I think there is a reason for this; the reason is the fallacy of composition, a fallacy of composition similar to the one that Keynes looked at, talking about how a nation can save itself into poverty, that when times are bad what makes sense for the individual household or firm is to cut back on expenses, to draw in your horns; if you're a firm to defray any new investments, and so on. This exacerbates the national problem as people stop consuming and investing. In the same way, when you have a difficult global economic climate, it makes sense for each country to try to bolster up its own finances, its own balance of trade. We've seen plenty of competitive devaluation. Indeed, here we are sitting in the international capital of competitive devaluation, widely considered in the '30s to be the most evil of all protectionist schemes, today endorsed and praised to the skies by people who enjoy reputations, even among financial journalists, if I can say so, as free traders. Competitive devaluation is a tariff, it is an attack on free trade. And yet somehow today this has become a normal part of international economic planning. What is needed? Just as Keynes argued that you needed a macroeconomic policy agency looking at what is good for the entire national economy, you also need to have agencies in the world economy, in the global economy, whose mandate is for the health of the overall global economy. The World Bank and the International Monetary Fund, the EBRD, the Inter-American Development Bank can all, I think, play a constructive role in this, although they need to have somewhat larger resources and to take a broader view of their mandates in some cases. But I think we need to clearly get beyond this notion of ever six months finance ministers sit down and issue a platitudinous communique saying, you know, basically all bad things should be reduced and all good things should be increased, and then we all go home. If we can't provide institutional, ongoing agencies for international cooperation, then we might as well just write the whole thing off. People have spoken about ideas like a global central bank. I would simply like to suggest here, rather than prescribing a lot of things, that there are ways in which a more demand-oriented, expansionaryoriented program can also be a more market-driven program and can reduce trade tensions as well as employment tensions among advanced countries. To give you just a quick example, that instead of the advanced countries spending their time squabbling with each other over agricultural subsidies, it might be interesting to look at consumption subsidies for developing countries for hungry people, underfed people in the developing world. The same money now spent, essentially wasted, on agricultural subsidies for producers, if pumped onto the consumption side of the equation could reduce regulation, free up agricultural trade, and even potentially raise incomes of farmers in developed and developing countries. There are ways in which institutions with a global mandate and whose basic charter is concern for the health and growth of the overall global economic system can relieve us of some of our problems and address even some of our

particularly pressing political problems, such as the chaos and desperation that is threatening to turn Eastern Europe into an arena of, God forbid, nuclear war, but to make Yugoslavia, to make the Bosnian mess look like nothing, like an English soccer riot.

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Economy Key Hegemony The economy is key to hegemony Samuel Huntington (Professor of the Science of Government at Harvard) 1993 “Why International Primacy Matters,” International Security, v17 n4, p. 81 “Economics,” as Daniel Bell has said, “is the continuation of war by other means.” Economic primacy matters because economic power is both the most fundamental and the most fungible form of power. For the United States, the loss of economic primacy to Japan could be highly damaging, as would have been the loss of political-military primacy to the Soviet Union. This loss to Japan would, first, make U.S. influence in world affairs subordinate to that of Japan and, second, reduce long-term U.S. economic welfare, as Japan used its power, as its leaders and policies have said that it would, to accumulate high-technology, high-value-added industries in Japan, and to reduce the United States to the status of a “giant Denmark.” The American public, in the phrase that provoked Robert Jervis, very justifiably “is obsessed with Japan for the same reasons that it was once obsessed with the Soviet Union. It sees that country as a major threat to its primacy in a crucial arena of power.” Does Professor Jervis really believe that Americans are wrong for not wanting to live in a world where the major decisions affecting them economically are made in Tokyo? Does he really think that those decisions would be the same as decisions made in Washington, New York, Chicago, Atlanta, Houston, and Los Angeles?

Economic decline destroys US hegemony Zalmay Khalilzad, RAND, The Washington Quarterly, Spring, 1995 The United States is unlikely to preserve its military and technological dominance if the U.S. economy declines seriously. In such an environment, the domestic economic and political base for global leadership would diminish and the United States would probably incrementally withdraw from the world, become inward-looking, and abandon more and more of its external interests. As the United States weakened, others would try to fill the Vacuum. To sustain and improve its economic strength, the United States must maintain its technological lead in the economic realm. Its success will depend on the choices it makes. In the past, developments such as the agricultural and industrial revolutions produced fundamental changes positively affecting the relative position of those who were able to take advantage of them and negatively affecting those who did not. Some argue that the world may be at the beginning of another such transformation, which will shift the sources of wealth and the relative position of classes and nations. If the United States fails to recognize the change and adapt its institutions, its relative position will necessarily worsen. To remain the preponderant world power, U.S. economic strength must be enhanced by further improvements in productivity, thus increasing real per capita income; by strengthening education and training; and by generating and using superior science and technology. In the long run the economic future of the United States will also be affected by two other factors. One is the imbalance between government revenues and government expenditure. As a society the United States has to decide what part of the GNP it wishes the government to control and adjust expenditures and taxation accordingly. The second, which is even more important to U.S. economic wall-being over the long run, may be the overall rate of investment. Although their government cannot endow Americans with a Japanese-style propensity to save, it can use tax policy to raise the savings rate.

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Economy Key Elections Economy key to presidential voting NPR June 30 2008 'It's the Economy, Stupid': Ask the Advisers http://www.npr.org/templates/story/story.php?storyId=92036168 Talk of the Nation, June 30, 2008 · Ask most Americans to pick the one issue that will most drive their vote come November, and chances are they'll say it's the economy. Gas prices, the housing crisis, stock portfolios, unemployment... All weigh on many people. And voters who are hurting want to know which candidate can turn things around, and how.

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***Affirmative Answers***

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N/U- Alternative Energy Now Plan is a drop in the bucket in comparison to sqo investment in alternative energy. Samuel Bodman (Energy Secretary in Washington) March 30 2008 “U.S. Energy Policy, as the Energy Secretary Sees It” To the Editor: Your March 25 editorial ''Pain at the Pump and Beyond'' pointed to the strain that high energy prices are putting on America's economy, families and businesses. As energy secretary, I agree that our nation is ''far too dependent on oil.'' We absolutely must lessen our dependence on fossil fuels, harness the power of clean energy, and increase our energy efficiency. And so I strongly disagree with your statement that the Bush administration's energy strategy is ''focused on one thing: getting more oil.'' At best, this suggestion demonstrates an incomplete understanding of the efforts under way across our nation. Since the start of this administration,

the federal government has spent more than $12 billion to research, develop and promote alternative energy sources. Last year alone, the Energy Department announced more than $1 billion to spur the growth of a robust, sustainable biofuels industry -- with a focus on cellulosic ethanol. We also continue to make critical investments in solar and wind power, hydrogen fuel cells, plug-in hybrid electric vehicles, cutting-edge clean coal plants and advanced nuclear power technologies. And we're already seeing results -- in our national laboratories and, more important, out in the marketplace. This work has been under way for years and must continue at a rapid pace. After all, our energy challenges have been decades in the making and will not be solved overnight. Our national strategy is not a reaction to high oil prices. It's a comprehensive policy that seeks to address two of the most fundamental challenges we face: improving our energy security and combating global climate change. Today's high energy prices only underscore the urgency of these efforts.

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Economy Down: Housing Market The Housing Crisis is battering the US economy Al Jazeera News 7/22/08 Al Jazeera News “Housing crisis batters US economy http://english.aljazeera.net/news/americas/2008/07/2008722162642392552.html The US treasury secretary has said that the US economy faces further uncertainty unless its housing crisis eases. Henry Paulson warned on Tuesday that consumers could expect "continued stresses" in the financial markets until the housing market improved. "Our markets won't make progress in a straight line and we should expect additional bumps in the road," he said in New York.

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Economy Down: Generic The economy is weak- multiple factors Ellen Simon 7/21/08 Kansas City Star, As economy contracts, tight times are forecast to continue, http://www.kansascity.com/business/story/714395.html Factories laying off workers, stocks tumbling and shoppers ditching their credit cards forced the economy to contract in June, The Conference Board said Monday. The private business group’s index of leading economic indicators also sees continued tight times in the second half of 2008. The indicators, meant to forecast future economic activity, fell 0.1 percent last month, in line with forecasts by Wall Street economists surveyed by Thomson Financial/IFR. The group also revised May’s number downward to a 0.2 percent decrease, from a 0.1 percent increase. The financial crisis, high gas and food prices, and the weak dollar “are all combining to produce unrelenting downward pressure on economic activity,” said Ken Goldstein, labor economist with The Conference Board. “This is also why it wouldn’t take much to push the economy so it’s even weaker in the second half of 2008.”

Economy down- NO rebound Mark Basch 7/21/08 The Florida Times-Union, Indicators hint weak economy will continue, http://www.jacksonville.com/tu-online/stories/072208/bus_307284281.shtml The economic news has been ugly lately and, unfortunately, it doesn't look like it's getting better anytime soon. Indexes of future economic activity, both locally and nationally, are pointing toward continued weakness in the second half of this year. The Conference Board said Monday that its U.S. Composite Index of Leading Economic Indicators fell 0.1 of a percent in June, following a 0.2 of a percent drop in May. Weakness among the indicators was widespread, the New York research organization said.

Economy down Mark Basch 7/21/08 The Florida Times-Union, Indicators hint weak economy will continue, http://www.jacksonville.com/tu-online/stories/072208/bus_307284281.shtml The outlook isn't any better nationally. "The domestic economy is showing no sign of strength," Conference Board economist Ken Goldstein said in a press release. In addition to problems in the housing and banking markets, Goldstein also cited high gas and food prices, a weak dollar and weak consumer confidence. "It wouldn't take much to push the economy so that it's even weaker in the second half of 2008," he said.

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Dollar Down The dollar is low and will continue to do so. Kim-Mai Cutler and Stanley White 7/22/08 Bloomberg News, Dollar Near Record Low as Wachovia, WaMu May Report Losses, http://www.bloomberg.com/apps/news?pid=20601101&sid=ab.ZPhRpeAC8&refer=japan The dollar traded near a record low against the euro before reports from Wachovia Corp. and Washington Mutual Inc. that may show they had combined second- quarter losses of $3.8 billion, raising concern the U.S. economic slowdown will deepen. The dollar also slid against the yen before reports this week forecast by economists to show that U.S. home sales and durable-goods orders dropped in June. The yen rebounded from a near a record low against the euro, and the Australian dollar was near a 25-year high against the U.S. currency. ``The numbers out of the U.S. are still pretty grim and there's no immediate prospect that things are going to get better,'' said Daragh Maher, a London-based currency strategist at Calyon, the investment-banking arm of Credit Agricole SA, France's second-biggest lender. ``This has been driving the dollar lower.''

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Business Confidence Down Business Confidence has dropped for the third straight quarter Cameron England (Chief business reporter of The Advertiser) 7/9/2008 BUSINESS confidence has declined for the third straight quarter, the Commonwealth Bank Business SA Survey of Business Expectations says. http://www.news.com.au/adelaidenow/story/0,22606,23994373-913,00.html The survey, released yesterday, shows a 3.7 point drop in business confidence in the June quarter to 88.5 points, following a 15.9 point slide in the previous quarter. Business SA chief executive Peter Vaughan said while the economy was still growing, the increase in material and labour costs, high petrol prices, and interest rates, were dampening confidence. "While the mining and defence booms provide a positive outlook in the State, increasing business costs are clearly affecting business confidence in the local economy,'' Mr Vaughan said. "Business conditions dipped further than respondents anticipated in the March quarter. "We can't ignore that interest rates are at a 12-year high, petrol prices are spiralling and costs of doing business continue to climb.'' Mr Vaughan said survey respondents also indicated they were less optimistic about the upcoming quarter than they were in the previous survey.

Business Confidence Falling Chris Crum (Correspondent for the Small Business New) 6/30/2008 Small Business Newz, http://www.smallbusinessnewz.com/topnews/2008/06/30/small-business-confidence-at-all-time-low Unfortunately, small business economic confidence is at an all-time low. In fact, confidence indicators were down in every single category of the survey. "With prices rising, especially gas and food, just about everybody is feeling the squeeze," says, Discover business credit card director Ryan Scully. "People are starting to change their habits and cut back. For small business owners who are seeing profits go down as a result, that means they have less to invest in finding new business," Scully added. One startling statistic is that 48% of the 4,000 consumers surveyed, believe that the American Dream is dead. Nearly half. Quite a grim outlook, although the majority feel that owning a small business is one of the best bets.

Lowest Business Confidence in 28 years Michael Donnelly (Chief Economist) 7/8/2008, Business Confidence at 28-year Low, http://pbp.typepad.com/economy/2008/07/business-confidence-at-a-28-year-low.html During the very worst of the 2001 recession in November of 2001 small business confidence as measured by the NFIB hit 97.3. At the low point of the more serious 1990 recession confidence dipped even lower at 91.7 in January of 1990. The most current reading of June 2008 ? It's much lower, only at 90.0. Only during the very worst of the 1980 recession did business optimism drop lower than that.

Business confidence, and overall economic activity, is extremely low. New Zealand Herald April 1 2008 “Fall in confidence points to stalling growth” Business confidence has taken another lurch lower in the National Bank's March survey. Thirty per cent of firms expect their own activity to fall over the coming year and only 24 per cent expect it to increase. The net 6 per cent pessimism is the worst since the recession year of 1991, although it touched minus 4 per cent early in 2006. In this indicator, optimists almost always outnumber pessimists, and by a healthy margin. It has only been in negative territory 12 times in the survey's 20-year history, for less than 6 per cent of the time. Confidence about the general business situation has also tumbled. A net 58 per cent are pessimistic, up from a net 44 per cent in February, and the highest since late 2005. While general confidence can be blown around by news

reports and anecdotal chatter, firms' views of their own outlook provide a more reliable indicator. When combined with weaker hiring and investment intentions and lower profit expectations, it points to growth having stalled, the bank's chief economist, Cameron Bagrie, said. And export intentions have fallen to levels last seen during the Asian crisis of 1998. The credit crunch was quite significant, given our reliance on overseas funding, he said, and the housing market slowdown had now spread into the broader economy. Although we go into the slowdown with unemployment at historic lows, hiring intentions have been negative for two months in a row, which portended a significant softening in the demand for labour, Bagrie said.

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Business Confidence Low Confidence gone now- multiple factors. The Nation January 23 2008 “Industrial Confidence Index falls 2.5 points” Vice chairman Adisak Rohitasune said the

US sub-prime crisis and the baht's strength had sapped the confidence of manufacturers, particularly of steel, food and plastics. However, domestic orders and sales picked up last month, thanks to consumer spending for the New Year festival. The FTI's monthly survey cited unstable oil prices and the global economic slowdown as hitting export-oriented manufacturers. Most operators were worrying that the central bank would boost interest rates following higher forecasts for inflation, which would put upward pressure on their cost of doing business..

Non-unique- Confidence at lowest levels since 2001 terrorist attacks; little hope. The Press April 23 2008 “Investors' spirits droop” Investor confidence has plunged to its lowest levels since the 2001 terrorist attacks in the United States and the dotcom technology share market bust. The ASB bank survey of investors slumped from a net 19 per cent positive about the future in December, to a net 1% negative in the March quarter, according to a survey out today. Confidence has been hit by a combination of factors including the sharemarket dive earlier this year, a weaker housing market, growing pessimism about the economy, continuing finance company woes and the subprime mortgage and credit crisis in the United States. That saw a sharp jump in investors expecting worse returns this year, according to the quarterly ASB Bank survey. The economy is in a funk and for many this year will be grim, say Westpac Bank economists, who this week forecast growth of 1.4% this year -- half the level seen last year.

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Global Economy Down The Global Economy is on the Brink of Collapse. Ambrose Evans- Pritchard (Editor of The Telegraph) 7/21/08 Telegraph news, The Global Economy is at the Point of Maximum Danger, http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=A1YourView&xml=/money/2008/07/21/ccvi ew121.xml My view is that a dollar crash will be averted as it becomes clearer that contagion has spread worldwide. But we are now at the point of maximum danger. Britain, Japan, and the Antipodes are stalling. Denmark is in recession. Germany contracted in the second quarter. May industrial output fell 6pc in Holland and 5.5pc in Sweden. The coalitions in Belgium and Austria have just collapsed. Germany's left-right team is fraying. One German banker told me that the doctrines of "left Nazism" (Otto Strasser's group, purged by Hitler) had captured the rising Die Linke party. The Social Democrats are picking up its themes to protect their flank. This is the healthy part of Europe. Further south, we are not far away from civic protest. BNP Paribas has just issued a hurricane alert for Spain. Finance minister Pedro Solbes said Spain is facing the "most complex" economic crisis in its history. Actually, it is very simple. The country was lulled into a trap by giveaway interest rates of 2pc under EMU, leading to a current account deficit of 10pc of GDP. A manic property bubble was funded by foreigners buying covered bonds and securities. This market has dried up. Monetary policy is now being tightened into the crunch by the ECB, hence the bankruptcy last week of Martinsa-Fadesa (€5.1bn). With Franco-era labour markets (70pc of wages are inflation-linked), the adjustment will occur through closure of the job marts. China, India, East Europe and emerging Asia have all stolen growth from the future by condoning credit excess. To varying degrees, they are now being forced to pay back their own "inter-temporal overdrafts". If we are lucky, America will start to stabilise before Asia goes down. Should our leaders mismanage affairs, almost every part of the global system will go down together. Then we are in trouble.

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N/L- Incentives Popular Business likes incentives for alternative energy. New York Times February 16 2006 “G.E. Sees Much to Like In Alternative Energy” In November, Goldman Sachs committed to investing $1 billion in renewable energy, and it is already ''well on its way'' to achieving that, according to Lucas van Praag, a Goldman spokesman. J. P. Morgan Chase, too, has said it will invest more than $250 million in wind-energy projects. And venture capitalists have for some time been investing in smaller renewable energy projects and technologies. Over all, says Michael T. Eckhart, president of the nonprofit American Council on Renewable Energy, the $7 billion invested in renewable energy projects last year should increase by 25 percent a year over the next few years. He and many others say they believe

that, if the president's imprimatur results in new regulations or tax incentives, even more Wall Street money will be attracted to such projects. Wind power has been the leading alternative energy source in recent years. The costs of turbines have come down even as their reliability and efficiency have increased; G.E., Goldman, J. P. Morgan Chase and others are snapping up wind farms across the world. By contrast, persistent shortages of silica, needed to make solar panels, have kept the solar energy sector from taking off on a similar trajectory. And few Wall Street dollars are going to projects that involve wresting megawatts from agricultural waste, be it crops like corn or the switchgrass Mr. Bush mentioned. And there has been almost no interest, at least so far, in methane generated from manure. Industry supporters see President Bush's speech as sending a new signal that might favor some of the more exotic energy sources, though. ''Now that the president has put the power of the bully pulpit behind ethanol,'' Mr. Eckhart said, ''a lot of conservative people who thought biofuels were silly will view them as a mainstream investment.'' For now, investors say that the logistics of selecting sites for factories and transporting biofuels keep them from being economically competitive. ''George Bush said interesting things about potential opportunities in biomass, but we need a better understanding of any legislative or regulatory changes his comments might spur,'' Mr. Van Praag of Goldman said. GE Energy Financial Services has taken a few tentative steps toward biomass. It has a longtime, if small, investment in plants that burn woodchips for fuel. It is seeking advice about potential biofuel investments from colleagues at Jenbacher, an Austrian company G.E. bought in 2003 that makes generators that run on the gases emitted from landfills. And Mr. Urquhart said he is ''going to keep calling our people in Washington, and see what kind of rule-making is evolving around the biofuel idea.'' In the meantime, he is keeping his eye out for projects that might merit investment even without additional government incentives. Mr. Calhoun has his eyes on Mr. Urquhart's quest, in case it turns up something G.E. should buy or make. ''Alex helps us decide where to put our development dollars, and we help him evaluate where to invest,'' Mr. Calhoun said. ''And if he finds a great biomass plant, we'd be delighted.''

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Link Turns: Alternative Energy Businesses like alternative energy incentives and flourish after receiving them. Long Island Business News June 1 2007 “Long Island's alternative energy future looks bright” Long Island is "uniquely positioned" to exploit the transition from fossil fuels to alternative energy forms, according to Yacov Shamash. Shamash, dean of Stony Brook University's College of Engineering and Applied Sciences, said an abundance of business incubators gives the Island a chance to "commercialize that technology" as the transition unfolds. The dean was speaking May 24 during a panel discussion on the business of alternative energy at the Hauppauge Industrial Association's trade show at Suffolk County Community College. One of the incubators Shamash referred to is Stony Brook's Advanced Energy Research and Technology Center, currently housed in a KeySpan building in Islandia but slated to move onto the Stony Brook campus by 2009, according to KeySpan chief executive Robert Catell. Enhanced Coverage LinkingRobert Catell. -Search using: Biographies Plus News News, Most Recent 60 Days "Alternative energy is the world's business, but the solutions can start here," said Catell, a panel member and strong proponent of the Research and Technology Center. "Long Island has long been a center for innovation. " The Stony Brook center will examine renewable energy sources, focusing on resources abundant in the Northeast such as wind and water. Catell said he is especially

Attacking the alternative energy issue requires a "diversity of scientific projects" and cooperation between academia, business and government, Shamash noted. To that end, New York has put up $35 million for the Research and Technology Center, which will leverage the work of the newly dedicated Center for Functional Nanomaterials at Brookhaven National Laboratory, a project funded by the U.S. Department of Energy. The Stony Brook center will also look at hydrogen fuel, fuel cells, conservation and a "smart grid" power distribution system. Bruce interested in the power of tides, including the powerful currents that race through the East River.

Germano, Long Island Power Authority vice president of retail services and panel member, said LIPA's electric grid hasn't kept up with other advances and a better grid would use sensors and communications for enhanced reliability. A "self-healing grid" could anticipate coming blackouts and prevent them, he noted, and a more interactive grid could communicate with advanced appliances in homes that would run at off-peak times. Long Island's industrial strength is another plus for the future of alternative energy here, according to Germano. "This creates new economic development opportunities for the region and the Island," he said. The panel moderator was Patrick Foye, downstate chairman of the Empire State Development Corp. He called alternative energy a "linchpin" of Gov. Eliot Spitzer's energy policy, which has three objectives: driving down the cost of electricity, being good environmental stewards and building energy infrastructure. Among the 50 states, New York has the second-highest energy costs behind only Hawaii. Reducing demand through maximized efficiency means "conserving energy is good business," Foye said. Catell called for a new regulatory structure for electric utilities, which have always been based on selling consumers energy. He suggested "decoupling" rates from usage and creating customer conservation incentives.

Business loves federal investing in alternative energy, it is the best way to jumpstart business effectively. Edward Markey (chairman committee on house select energy independence and global warming) April 16 2008 “promoting private investment in renewable energy projects” Today, as President Bush gets ready to tell America that he has come around on global warming and that he supports freezing U.S. global warming pollution 17 years into the future, we welcome a group that does have the vision and ambition to seriously address this problem. These individuals probe the technological trenches of Silicon Valley and other innovation hotspots to find the solutions that will solve the energy and climate crisis. They pull the strings of capitalism, enabling ambitious young geniuses to turn today's dreams into tomorrow's technological realities. Venture capitalists play a key role in innovation. The $26 billion in U.S. venture capital investment in 2006 represented less than 1 percent of U.S. GDP. But the $2.3 trillion in revenues these firms generated made up 18 percent of U.S. GDP. Venture capital-backed companies employed over 9 percent of the U.S. private sector workforce, and job growth in these companies is occurring at nearly three times the rate of the rest of the private sector. The corporate behemoths that dominate the business pages are mostly mature companies. They face fierce competition that often forces them to outsource manufacturing in order to stay competitive. But low-wage developing countries cannot compete with an innovation economy. We

should salute the American entrepreneurs that for decades have pushed the American economy to the technological edge, where wages and growth are high. The challenge today is to channel those creative energies to help solve our global warming problem and to help put the economy back on track. Many of the technologies under development by venture-funded firms are game-changing. They are technologies that will threaten the energy establishment. As we heard from an Exxon executive last week, that company is investing $10 million a year-less than one tenth of one percent of their $40 billion profit from 2007-to create an alternative energy future. I'm not a venture capitalist, but this business plan gets an "F" in my book. Not surprisingly, by 2030, Exxon is not expecting alternative energy to play any significant part in their business. Alternative energy-any alternative-is a threat when you are raking in the largest corporate profits in history. We can not expect these companies to be the innovators that will solve the energy and climate challenge. But the

planet's global warming cure is out there. It is in the mind of an innovator who will discover the world's most efficient solar panel. It is in the mind of another innovator who will devise a manufacturing process that will cut the cost of that solar panel in half. These infinite seeds of innovation will be sowed by venture capitalists that will harbor entrepreneurs through the early periods when risk-averse commercial banks will steer clear. Governments can take two approaches to solving great technical challenges like reducing global warming pollution. They can prescribe the answer, for example by massively subsidizing nuclear power generation, as President Bush supports. Or they can set a target and leverage the creative genius of the innovators of the world to find the answers. The first is to cling to the technological past. It also means compliance at the greatest possible cost. That approach is akin to investing in a candle maker because Thomas Edison's light bulb will never catch on. It is like doubling down on mainframes because you don't believe many people will want computers on their desks. We don't know what all the answers will be to the global warming problem. But investing

taxpayers' dollars on yesterday's technologies will ensure that the world's innovators will have to look outside the United States to find the markets they need to develop tomorrow's great innovations. Unfortunately, the wider economic and job growth impacts of innovation will go to markets outside the United States as well. This is something that the Big Oil and Big Business Bush Agenda simply does not understand. Leveraging private capital is the best chance we have of finding the solutions that will save us from the worst effects of global warming. Public dollars cannot and should not bring this fundamental shift on their own. A cap-auction-and-trade system that puts a price on carbon emissions that reflects the true costs of global warming is the most important step Congress

It will level the playing field for clean energy technologies and unleash the unequaled innovation of the American entrepreneur. And it will give smart money-the venture capitalist- every reason to go searching for those ambitious innovators. can take this year.

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Link Turns: Climate Regulations Climate regulations boon to economy Investor Network on Climate Risk 2003 (“Q: Won't climate regulations hurt U.S. businesses?” http://www.incr.com/NETCOMMUNITY/Page.aspx?pid=218&srcid=198 A: No. In fact, enacting climate legislation, with mandated greenhouse gas reductions, is good for the economy. According to researchers at the University of California, Berkeley, California's annual gross state product will grow by $60–74 billion by 2020, creating 17,000 to 89,000 new jobs, as a direct result of a 2006 law limiting greenhouse gas emissions in the state. And the European Commission expects to save 60 billion euros through its proposed plan to cut energy use 20 percent by 2020 and increase renewable energy use to 12 percent by 2010. Examples such as these are beginning to provide convincing evidence that climate regulations will prove to be a boon, not a bane, to our economy.

No action on climate bad for economy Investor Network on Climate Risk 2003 (“Q: Won't climate regulations hurt U.S. businesses?” http://www.incr.com/NETCOMMUNITY/Page.aspx?pid=218&srcid=198 A: No. In fact, doing nothing poses greater economic risk than taking action now. In 2006, Sir Nicholas Stern, former Chief Economist and Senior Vice President of the World Bank, found that doing nothing about climate risk could shrink the global economy by as much as 20 percent, whereas addressing the problem now would cost about 1 percent of global GDP per year — a small price in comparison. (See the Stern report here.) This conclusion was echoed by Paul Volcker, former Chairman of the U.S. Federal Reserve, who in 2007 said, "I don't think [taking action on climate change] is going to have that much of an impact on the economy overall. Second of all, if you don't do it, you can be sure that the economy will go down the drain in the next 30 years…What may happen to the dollar, and what may happen to growth in China or whatever pale into insignificance compared with the question of what happens to this planet over the next 30 or 40 years if no action is taken."

Climate regulations boon to businesses Investor Network on Climate Risk 2003 (“Q: Won't climate regulations hurt U.S. businesses?” http://www.incr.com/NETCOMMUNITY/Page.aspx?pid=218&srcid=198A: No. In fact, climate regulations are good for U.S. businesses. In 2007, a coalition of more than 25 major U.S. corporations joined together to call for strong national carbon legislation, recognizing the need for regulatory certainty, and a different group of more than 60 leading institutional investors, asset managers and companies issued a "Call to Action" for U.S. Congressional action on climate. These investors and companies are beginning to recognize the negative impact of regulatory uncertainty on their operations. And the examples of companies benefiting from the new low-carbon economy are numerous: 3M saved $1 billion in the first year alone of its waste-reduction program in which it prevented an estimated one million tons of pollution; BP expects to save $650 million by cutting greenhouse gas emissions to 10 percent below 1990 levels; and General Electric's "ecomagination" program has a backlog of green technology orders worth $50 billion, more than twice the projected revenue of $20 billion by 2010 that the company expected.

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No Economic Collapse No chance of a large-scale economic downturn if US econ crashes; China and India’s economies will ultimately stop the ripple effect. Straits Times January 24 2008 “Economic worries cast pall over Davos; Glitzy annual forum kicks off with debate on global impact of feared US recession” DAVOS - THE annual gathering of the world's political and business elite opened here yesterday, with the dour outlook for the global economy casting a pall over the glitzy event. As concern grew over the global stock market turmoil and a possible US recession,

the 38th World Economic Forum kicked off in this Swiss ski resort with a debate on the impact of a feared US recession on the rest of the world. Economists, government officials and business bigwigs offered mixed views on whether emerging markets such as China and India 'decoupled' enough from the US economy to withstand the shock waves coming out of Wall Street. 'Decoupling is a fantasy. The rest of the world is not as resilient as some assume,' said Mr Stephen Roach, the Asia chief of investment bank Morgan Stanley and a noted detractor of the decoupling theory. Mr Roach, who called himself 'very bullish' on Asia, said the bottom line was that US consumption remained the key driver of world growth. US consumption is worth $9US.5 trillion ($13S.6 trillion) compared with about $1US trillion in China and India's $650US billion, he pointed out. China and India cannot yet step into the US' shoes, he said, predicting a 'mother of all recessions which would need a painful and lengthy workout period'.

Noted economist Fred Bergsten, the director of Washington-based Petersen Institute of International Economics, staked his reputation on just the opposite. 'A global recession is inconceivable,' he said. With prime ministers, finance ministers, central bankers and the creme de la creme of the private sector hanging on his every word, he made his case. 'If the US catches a cold, the rest of the world will catch the sniffles, maybe. Not pneumonia, I would say. Not even a cold,' he said. 'The world has, in fact, decoupled from the US,' he said, adding that 'spillover effect' would be the worst outcome of a US recession. 'Fifty per cent of the world's economic growth now comes from China and India. Let's grant the slowdown shaves off one percentage point of the emerging market growth.' In that case, he said, China may veer off from 11.5 per cent growth to 10 per cent. India, which is not as integrated into the US economy anyway, may stay unaffected. As a group, the emerging markets which include fast-growing economies such as Brazil and Russia, will post a healthy 6 per cent to 7 per cent growth. So, if the US slows down to 1 to 2 per cent growth, the world as a whole will still see 4 per cent growth, he said. 'Let us not extrapolate excessively the financial disruptions of the last few days,' he said, referring to the Wall Street meltdown which prompted the Federal Reserve to aggressively cut interest rates. 'In fact,' he said,

'we may actually be looking at the first episode of reverse coupling where the growth in the rest of the world props up the US and dampens its downturn.'

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Economy Resilient The economy is resilient. Mark Skousen 6/2/2003 http://www.markskousen.com/article.php?id=1096 The second lesson is that the global economy is far more resilient than anyone imagined. During the past 20 years, we have suffered through two major energy crises, double digit inflation, stock market and real estate crashes in the U.S. and Japan, an unprecedented credit crunch, mammoth federal deficits, the AIDS crisis, several major wars, terrorist attacks, the collapse of the Soviet Union and many other mini-panics, and yet we continue to survive and even prosper. We are not depression-proof, but we are surprisingly depression-resistant. Armageddon has again been postponed.

Nothing can derail it. Nariman Behravesh, chief economist and executive vice president for Global Insight, Newsweek International Jan. 16, 2006 issue, http://www.msnbc.msn.com/id/10756832/site/newsweek The U.S. and global economies were able to withstand three body blows in 2005—one of the worst tsunamis on record (which struck at the very end of 2004), one of the worst hurricanes on record and the highest energy prices after Hurricane Katrina—without missing a beat. This resilience was especially remarkable in the case of the United States, which since 2000 has been able to shrug off the biggest stock-market drop since the 1930s, a major terrorist attack, corporate scandals and war. Does this mean that recessions are a relic of the past? No, but recent events do suggest that the global economy's "immune system" is now strong enough to absorb shocks that 25 years ago would probably have triggered a downturn. In fact, over the past two decades, recessions have not disappeared, but have become considerably milder in many parts of the world. What explains this enhanced recession resistance? The answer: a combination of good macroeconomic policies and improved microeconomic flexibility. Since the mid-1980s, central banks worldwide have had great success in taming inflation. This has meant that long-term interest rates are at levels not seen in more than 40 years. A low-inflation and low-interest-rate environment is especially conducive to sustained, robust growth. Moreover, central bankers have avoided some of the policy mistakes of the earlier oil shocks (in the mid-1970s and early 1980s), during which they typically did too much too late, and exacerbated the ensuing recessions. Even more important, in recent years the Fed has been particularly adept at crisis management, aggressively cutting interest rates in response to stock-market crashes, terrorist attacks and weakness in the economy. The benign inflationary picture has also benefited from increasing competitive pressures, both worldwide (thanks to globalization and the rise of Asia as a manufacturing juggernaut) and domestically (thanks to technology and deregulation). Since the late 1970s, the United States, the

United Kingdom and a handful of other countries have been especially aggressive in deregulating their financial and industrial sectors. This has greatly increased the flexibility of their economies and reduced their vulnerability to inflationary shocks. Looking ahead, what all this means is that a global or U.S. recession will likely be avoided in 2006, and probably in 2007 as well. Whether the current expansion will be able to break the record set in the 1990s for longevity will depend on the ability of central banks to keep the inflation dragon at bay and to avoid policy mistakes. The prospects look good. Inflation is likely to remain a low-level threat for some time, and Ben Bernanke, the incoming chairman of the Federal Reserve Board, spent much of his academic career studying the past mistakes of the Fed and has vowed not to repeat them. At the same time, no single shock will likely be big enough to derail the expansion. What if oil prices rise to $80 or $90 a barrel? Most estimates suggest that growth would be cut by about 1 percent—not good, but no recession. What if U.S. house prices fall by 5 percent in 2006 (an extreme assumption,

given that house prices haven't fallen nationally in any given year during the past four decades)? Economic growth would slow by about 0.5 percent to 1 percent. What about another terrorist attack? Here the scenarios can be pretty scary, but an attack on the order of 9/11 or the Madrid or London bombings would probably have an even smaller impact on overall GDP growth.

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A2: Recessions The economy inevitably recovers from recession without impact Peter Lynch (Vice Chairman Fidelity Management & Research) September 18 2001 ABC News, Good Morning America Well we--you may not and it may take a little while. It is going to be choppy. I mean, people aren't going to decide when they're seeing news like this to go out and buy a sofa, go buy a refrigerator. It's just very discouraging. So that tends to slow consumer confidence. The confidence of the consumer has been very high. We have record housing sales, housing prices have gone up the last few years. As much as the stock market has gone down, housing prices--the average house has gone up more. So there's a lot of good things out there. The banking system is in very good shape. We have a lot of positives. We've had nine recessions since World War II--this might be number 10--but we've

got out of every one of them. And the stock market usually looks forward. It doesn't look backward. So for a little while look to this uncertainty, but then I'll say, 'What are we going to earn in 2003, 2004, 2005.' The market looks out, it doesn't look backwards.

Recessions cause diversification- helps the economy W. Michael Cox (senior vice president and chief economist at the Federal Reserve Bank of Dallas) January 9 1990 Investor's Business Daily Since 1960, the average recession lasted 11 months, with declines of 2.1 percentage points in total output and 1.7% in employment. The previous downturn, an eight-month pause from August 1990 to March 1991, saw just a 1.5% slump in economic activity and a 1.1% drop in the number of jobs. Before 1940, only one in seven recessions was over by 11 months. A third of them hung on for at least 23 months. Between 1887 and 1950, recessions meant an average decline of 13% in industrial production. Since 1960, the toll has been reduced to 7%. Shorter, milder recessions arise from a shift away from the dominance of boom-to-bust industries, such as farming and manufacturing. The economy has diversified, with volatile sectors not only being smaller slices of the pie, but also offset by more stable pieces, such as trade and services. Recessions are part of the system. Periods of economic slowdown serve a purpose in a capitalist economy. The pauses allow for time to correct excesses - rising inflation, bloated inventories, excess capacity, supply bottlenecks and misallocation of resources. Boom times hide the excesses, and they're wrung out during the down months. In recession an economy reorganizes itself, reallocating resources to emerge more efficient and productive. Layoffs are traumatic, but labor and other resources are freed for eventual use in the next wave of enterprises. Thousands of dot-com companies may have gone belly up, but we didn't lose their know-how. The technology and human resources are still here. Recession doesn't equal regression. We can reuse what we learned. Recessions are to some extent self-correcting. Now that a slump is here, the economy won't continue to spiral downward. Once down, it won't stay down. In an economy where markets provide continual feedback, behavior and expectations can change quickly. As demand falters, companies cut costs and reduce inventories. Prices adjust downward. Consumers react by buying more, reviving demand. Policy responses are part of the cure. The Federal Reserve moved aggressively in 2001 to lower interest rates. Credit is now cheaper than any time in the past 40 years. Looking ahead, the economy maintains considerable strength. Inflation remains tame at less than 2%. Real personal income continued to grow in 2001, so consumers have more money to spend. America still sits on a mother lode of new technologies - from electronics to medicine. The spirit of enterprise never lies dormant, not even in recession. Thus, the U.S. economy already has the makings of the next boom.

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Recessions Good Recession is key to economic growth Mark Rostenko (author and veteran floor trader at Chicago commodities exchange) 2002 “The Dips Don’t See a Double Dip” http://www.gold-eagle.com/editorials_02/rostenko040402.html The "job" of a recession is to clean the "fat" out of the system, mop up excess, and pave the way for the next expansion. Until that process is complete, there isn't much from which a legitimate expansion can arise. Recessions put weak companies out of business. In so doing, resources (skilled workers, capital) are freed up to be deployed more efficiently elsewhere. For example, Wall Street analysts who touted bankrupt Internet stocks are redeployed at local fast food restaurants to serve people in a capacity for which they are much better suited. Stronger businesses that have used the contraction to firm up their bottom lines and grow more efficient are able to take advantage of these resources during the ensuing expansion. The economy emerges from a recession

leaner, more efficient and in good shape for the next wave of growth and progress.

Short-term declines will ensure long-term growth Time September 24 2001 The Federal Reserve, by flooding the U.S. banking system with cash, is giving lenders the confidence to extend credit without disruption. Expectations of further Fed cuts in short-term interest rates, along with the flight of money to safe investments late last week, helped push long-term interest rates to their lowest levels since the 1998 Asian financial crisis. Trading wasn't always smooth after the bond market reopened Thursday. A communications breakdown with the Bank of New York, one of the main banks that process Treasury-bond trades, at one point delayed settlement of transactions worth at least $ 400 billion. By Friday, the bank insisted that "virtually all" problems had been solved, though a government official disputes that. At week's end the yield on the 10-year T-bond, which many mortgage rates are based on, stood at 4.55%, nearly a percentage point lower than it was four months ago. If long rates stay down, millions of homeowners will get a chance to refinance mortgages and cut their monthly costs. Many will take out cash when they refinance and use it to pay off credit-card debt or start a home improvement. The jobless rate, while a point higher than it was last October, remains remarkably low-just below the 5% considered "full employment" only a few years ago. Inflation remains tame. And the dollar, weaker last week against the yen and the euro, will make U.S. exports more attractive. So the seeds for a recovery, perhaps in early 2002, are being sown fast. Stock prices usually rise well in advance of any such turn. That's probably too much to hope for this week as the stock market reopens. Those industries clearly hurt by the attacks will get a tough ride--airlines, hotels, media, insurance and financial firms. General Electric and Ford on Friday warned of lower profits because of fallout from the terror attacks. Amid the early tumult, few investors will want to buy. That leaves sellers in charge of the market trend, at least for a little while. Waiting in the wings, though, are hedge-fund managers and others who have been looking for a cathartic last push lower in the stock market. Their thinking now is that any disaster-related selling would amount to a final washing out of panic and set the table for another bull run. After all, the broad S&P 500 has already fallen 30% since March 2000. As corporations report earnings this quarter and next, many will start to look better compared with the weak earnings in the corresponding quarters last year. Oracle, for example, reported last Thursday that it had beaten analysts' estimates by a penny. Even on Wall Street, there's a patriotic sense that a deep plunge would be a victory for the attackers. Within reason, traders will try to avoid that. Helping them will be new rules that make it easier for companies to buy back their own stock. Networking giant Cisco announced that it would buy back as much as $ 3 billion of its stock during the next two years.

Recession key to making the economy stronger in the long term Mark Rostenko (author and veteran floor trader at Chicago commodities exchange) 2002 “The Dips Don’t See a Double Dip” http://www.gold-eagle.com/editorials_02/rostenko040402.html During a recession, trade imbalances should narrow. This makes the economy more self-sufficient, self-reliant and thus economically stronger. However, the "mini-recession" has done nothing of the sort. The U.S. trade deficit remains at a monstrously high level. We remain exceptionally dependent upon the influx of foreign capital to prop up our markets, our currency and our economy. Our dependence on foreign capital is just as great as before the recession, leaving us just as vulnerable to the whims and fancies of foreign investors. We've seen no improvement and must continue to hope that foreigners keep feverishly buying our goodies forever. Given that the aforementioned are what is "supposed to" happen in a recession, it's logical to assume that these factors will serve to weigh upon future growth.

If you don't firm up the foundation, the economic structure isn't likely to grow very tall. Hence the increased prospects for a double dip. If the recession did little to improve our economic strength and efficiency, we can't possibly hope for strong economic growth and we remain vulnerable to further economic contraction.

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Recessions Good Recessions cleanse excesses before they become unmanageable Stephen Roach (chief economist and director of global economics at Morgan Stanley Dean Witter) January 7 2001 The San Diego Union-Tribune Obviously, a recession should be managed and contained. And if the Fed continues to cut interest rates over the next six months, as it should, it would help set the stage for the next upturn. A mild recession, however, should not be feared. Recessions happen, and for a U.S. economy plagued with excesses, a downturn may be the only way to purge these reckless tendencies. The United States has had five economic downturns since the 1970s, and these almost always purged the very excesses that can be most hazardous to economic health. In the past, the excesses took the form of unwanted inventories, vacant office buildings, unneeded factories or mounting inflation. The Federal Reserve usually stepped in when these imbalances got out of hand. Monetary tightening led to cuts in production, bringing inventories in better alignment with sales. Higher financing costs also tempered the zeal for overbuilding and for credit-based purchases of cars, furniture and appliances. As output slowed, the unemployment rate rose and consumer confidence sagged. Broader cutbacks in personal spending and capital spending then followed. As the recession deepened, demand was brought into better balance with supply, and inflationary pressures receded. In essence, the economy was cleansed. As painful as this process was -- both in terms of lost jobs and reduced incomes -- it set the stage for the next expansion. Today's excesses are different. First, Americans are not saving. As of November 2000, the personal savings rate has gone negative, dipping to minus 0.8 percent of disposable personal income. Compare that to late 1994, when the personal savings rate stood at 6.6 percent; over the previous 45 years it averaged about 8.5 percent. This plunge in savings reflects an extraordinary disparity between trends in personal income and spending. Since 1995, consumer expenditures have increased 4.4 percent annually, much faster than the 3.3 percent increase in disposable personal income. Never before have American consumers lived so far beyond their means. This cannot persist. That takes us to a second weakness -- America's stock market bubble. From 1995 to 1999, the frothy stock market tempted many investors to forgo traditional savings strategies, like methodically setting aside funds from paychecks. Instead, investors played the stock market and began to tap newfound wealth. Our estimates suggest that this "wealth effect" boosted growth in real consumer spending by as much as one percentage point per year from late 1996 to mid-2000. The stock market, however, can cut both ways. In the past 10 months, the market has plummeted -- Tuesday's surge notwithstanding -- and so has consumer demand. The stock-market bubble went hand-in-hand with the hype over the so-called new economy, in which many business executives decided that open-ended spending on computers and telecommunications equipments was the recipe for higher productivity and instant prosperity. From 1995 to 1999, the Commerce Department estimates that such spending by businesses and consumers, alike, accounted for fully 30 percent of the country's total economic growth. In the industrial economy, too much capital spending was fully evident in idle factories. In the information age, these excesses have taken the form of too many bits and bytes. While a significant portion of this technology spending can certainly be justified by the dramatic transformation of the economy, there is also evidence of indiscriminate technology buying, as well. For instance, companies have spent much too much on unnecessary computer and software upgrades. Finally, the economy has created an imbalance in America's economic and financial relationship with the rest of the world. The current account deficit -- which includes foreigners' profits on investments in the United States and Americans' investments in other countries as well as trade in goods and services -- may well have exceeded $440 billion in 2000. That is equivalent to 4.4 percent of our gross national product, a gap never before seen in the modern-day history of the United States. As recently as 1991, the U.S. current account was in balance. This deterioration is an unmistakable by-product of our shortfall in personal savings. Because domestic savings have plunged, America has turned to overseas lenders to finance investments in buildings and capital equipment. Our dependence on foreign capital has never been greater. Downturns prompt consumers to become more prudent, encouraging them to turn away from speculative investing in the stock market and to start saving sensibly, by putting aside a portion of their wages. Recessions also dampen corporate profits, which disappoint stock market investors, restraining the untamed spending of the wealth effect. The same weak corporate earnings also force companies to cut unneeded technology purchases. Recessions depress imports, too, a reduction that is the only means by which America can regain control over its large current-account deficit. Recessions, of course, create a new set of problems: rising unemployment, an increase in business and personal bankruptcies and a diminished federal budget surplus. Correcting the excesses of the 1990s will not be cost-free. And the longer the day of reckoning is postponed, the more painful the fix will ultimately be.

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