Energy Prices

NDN is proud to host the Honorable Luis Alberto Moreno, President of the Inter-American Development Bank and former Ambassador of Colombia to the United States, to discuss "The Current Economic Crisis and Its Impact on Latin America." This briefing will take place on Thursday, December 11, at 3 p.m. at NDN, 729 15th St., NW, 1st Floor.

Please RSVP as soon as possible. The event is open, but space is limited. Refreshments will be served. Please visit our Web site to view past events with the Ambassadors of Mexico, Colombia, Ecuador, and the Vice President of Panama.

On Wednesday, the Wall Street Journal reported that President-elect Barack Obama’s Chief of Staff-designee Rahm Emanuel "promised that a major economic stimulus would be 'the first order of business’ for Mr. Obama when he takes office Jan. 20. The focus of spending will be on infrastructure, specifically 'green infrastructure.'"  

According to Congressman Emanuel's statement, this green infrastructure will include mass transit, modernizing the electrical grid, and universal broadband Internet access, all of which NDN has been arguing should be included in the next Administration's agenda. NDN strongly supports this policy direction and will work with Members of Congress in support of this agenda.  

NDN has long been a strong and vocal advocate of a clean infrastructure stimulus because of its ability to create jobs and stimulate the economy in the short term while also creating a basis for future prosperity.

NDN Green Project Director Michael Moynihan first articulated the vision of clean and green infrastructure in his 2007 paper, Investing in Our Common Future: U.S. Infrastructure.

As Moynihan wrote more than a year ago, America needs "a GREEN Act requiring that federal infrastructure and buildings...not only address issues like global warming but also establish American leadership in green technologies of the future." Wrote Moynihan, "Only by working together can Americans reverse the decline in infrastructure that is eroding our present economy and make the forward-looking public investments needed to ensure future prosperity." To that end, NDN has proposed a number of green stimulus measures including a clean infrastructure bank, modernization of the electrical grid, support for mass transportation, and greater broadband access.

Recently, Moynihan, NDN Globalization Initiative Chair Dr. Robert Shapiro, and NDN President Simon Rosenberg have authored a number of essays and analyses on clean infrastructure and clean technology:

• Clean Infrastructure Stimulus to Be the Obama Administration's "First Order of Business"
• A Stimulus for the Long Run
• Accelerating the Development of a 21st Century Economy: Investing in Clean Infrastructure
• Solar Energy: The Case for Action

Additionally, earlier this week, NDN hosted a Capitol Hill forum entitled, "A Vision for a Modernized Electric Grid: Clean Infrastructure for a 21st Century Economy," with U.S. Reps. Jay Inslee and Earl Blumenauer, FERC Commissioner Wellinghoff, and other energy experts. Click here for video and photos of the event.

Word has just come down that U.S. Rep. Henry Waxman (CA-30) has defeated Rep. John Dingell (MI-15) in the race for chairman of the powerful House Energy and Commerce Committee. This will have a dramatic impact on the course of climate change and energy legislation in the 111th Congress.

New York City -- At NDN, we have been arguing for many months that a stimulus package is needed to jump start this difficult economy. We need a proposal that works for the long term as well as the short term. Absent real stimulus, there is a possibility, as Rob Shapiro argues, that the economy may lapse into a "sub-optimal equilibrium" in which people spend and produce far less than they can. However, we have also argued that the form the stimulus takes is as important as the amount. Invesments in clean infrastructure have the ability not only to get money onto the street quickly but also to address our long-term economic challenges such as stagnant wages, rising energy costs and the threat of climate change.

Yesterday, President-elect Obama and his Chief of Staff Rahm Emanuel said that a clean energy and infrastructure stimulus package literally will be the first order of business for the new Administration come January. What a difference a new President can make!

This is good news for the American economy and the American people. Clean infrastructure investments have the ability to create high-paying domestic jobs, lower energy costs and raise productivity all while stimulating the economy in the short term.

Here are some of the stimulus measures proposed yesterday by the President-elect's new chief of staff: mass transit, upgraded electricity transmission lines, "smart" electrical meters that allow consumers to save money by using electricity at off-peak hours, and universal broadband Internet access. 

All not only make sense but are critical to our future.

As the new Administration takes shape and a new Congress prepares to take office, we look forward to working with stakeholders and policy makers to make these critical investments and get America moving again!

In a remarkable spectacle, an Administration with a sustained record of economic blunders and failures finds itself aghast at the mistakes and mismanagement of U.S. automobile companies. Imagine Confederate General John Pemberton, after leading his forces to an historic defeat at Vicksburg, dismissing his cook for squandering the rum rations.

Yes, America's big three automobile makers (with an assist from the auto workers' union) have been so consistently unimaginative, self-regarding and inept that they've brought themselves to the brink of bankruptcy. Now they find themselves pleading for a bailout which, under normal circumstances, most sane policy makers would dismiss out of hand. But circumstances today are as far from normal as most Americans have ever experienced, and the request requires a serious second look.

The automakers had been in deep trouble for some time; but until the economic crisis hit, their condition was far from terminal. The Bush Administration's inept strategies and incompetent management of the crisis then dealt a weak industry new, serious body blows. First, the sudden upheavals across the financial system, along with the Administration's inability to explain how it happened or how they intended to protect the rest of us from the fallout, bred such extreme caution and even panic among consumers, that most demand for Detroit's products dried up. Moreover, much of the shrinking cohort of Americans still prepared to purchase a new U.S.-made car can't find financing for it. That's because two decades of deep federal distrust of regulating most financial institutions allowed them to speculate so recklessly with borrowed funds, that now, even with the bailout, their balance sheets are so precarious that they won't provide a new loan to anybody who couldn't pay for a new car without one. Finally, the crisis turned off the lines of credit and other routine financing that auto manufacturers need to operate. All three blows are consequences of the remarkable failures by the White House, the Treasury and the Federal Reserve to comprehend the dangers of the sub-prime mortgage market as it began to unravel and address effectively those dangers as the crisis snowballed.

So, the American auto industry now faces a kind of life-or-near-death moment, and if the President and Congress turn their backs, the results could drive down the economy much further. That's the only reason to countenance a bailout for an old industry that doggedly resists modernizing itself -- but under the current circumstances, it's a compelling one.

American businesses and consumers remain dangerously vulnerable to yet another economically-bloody shock which could further shift expectations downward, which in turn could produce a Depression-like state of mind and what economists call a "sub-optimal equilibrium." That's a very unpleasant condition in which markets produce much less wealth, jobs and incomes than they could, because consumers, businesses and banks no longer believe that the conditions to support better times can be sustained.

Since the Bush Administration is at least partly responsible for what now faces the auto industry -- and now faces the rest of us, too - they should put their weight behind new help for automakers and auto workers. But the bailout shouldn't be a handout. The industry needs both a shake-up and a technological shift, and strings tied to the federal assistance can help make both happen. The first part of the shake-up is simple: the current executive teams are out, and everybody takes real pay cuts -- including some workers who at GM reportedly earn an average of $71 per hour (including benefits), compared to Toyota's U.S. workers at $49 per hour. The aid also should be tied to a greater commitment to develop and produce new engines and cars with extremely high mileage per gallon and a small carbon footprint, because that's the market being created by high energy prices and climate change. And to provide additional motivation, the government can conduct the kind of competition the Pentagon carries out routinely, in which the first automaker to produce a 75- or 100-mile-per-gallon, low-carbon automobile wins a 10-year contract to supply the federal government fleet. And the taxpayers providing the aid should not only get an equity share in return for their investments, but public-representative seats on their boards, to keep watch and keep tabs. Finally, the government should commit itself to cajoling or coercing the Big Three's lenders to enter into debt-equity swaps with the auto companies, and so improve their balance sheets enough to attract new private investors (and so avoid a second bailout).

Rescuing the auto companies is, of course, a slippery slope, but the alternative may be to skip past the slope and head directly for the cliff. As it is, it still may not be enough. Home foreclosures continue to rise, and the additional losses to mortgage-backed securities and their derivatives may soon absorb much of the current Wall Street bailout. Further, the global recession has pushed a number of emerging-market and transition economies perilously close to sovereign debt defaults, which would deal another serious blow to the financial institutions that today hold the debt of those countries. At a minimum, neither the economy nor the auto industry will tread water while Americans wait for the new President and new Congress to take office. That's why, this time, the extraordinary conditions to justify bailing out a failing industry are present. And if a Republican President and his party in Congress keep their ideological blinders on and ignore those conditions, Detroit's demise could take the GOP with it for a long time.

New York City -- On October 3, the day President Bush signed the $700 billion bailout package that Hank Paulson called vital to saving American capitalism, the Dow closed at 10,325. Yesterday it closed at 8,424. In the six unhappy weeks of the bailout fund's life, the Dow has shed close to 2,000 points or about 20% of its value. Almost as soon as the fund was authorized, the Treasury and the Fed shifted gears and followed Gordon Brown in using the first slice to invest in banks. Capitulating last week to the fund's dubious impact on markets, Secretary Paulson announced that the Troubled Assets fund would not be used, after all, to buy troubled assets. Yesterday, he announced he does not plan to use the unspent funds of about $410 billion at all but will instead leave it as dry powder for the Obama Administration. Some have unkindly called this fund a slush fund. However, launched by a former Goldman star, levered at close to 100% and with the goal of making opportunistic investments, it really resembles nothing so much as a Hedge Fund.

So what's wrong with a government hedge fund?

The advantage of a Hedge Fund over a more constrained capital allocation process is that the fund manager can make the decisions quickly. If the manager is a genius, the fund does well. However, a genius one year can turn out to be not so smart the next. And as the limited partners in this hedge fund, the public should have the right to withdraw its money if the fund manager does not have a strategy.

In a world of constrained debt, one cost of the public's commitment to this hedge fund is that it has used up a healthy amount of the public's credit -- something that has not gone unnoticed by markets. As an article in the current Barrons observes, the yield curve, or the premium for borrowing for a longer period, has stiffened, recalling the famous inflation premium on long-term debt that drove the Clinton Administration's fiscal restraint. That premium disappeared during the Bush years, thanks to supercharged global liquidity from the Asian savings glut and expansion that followed the Asian financial crisis. Its reappearance, however, bears noting. More ominously, perhaps, a little known derivative, the credit default swap for long-term U.S. government bonds -- a derivative that should not exist since it represents insurance against a Treasury default -- has risen in price. In other words, some are now betting against the full faith and credit of the U.S. government. 

However, this hedge fund poses another problem for the economy and government policy that is impacting the proposed government stimulus, its opportunity cost. Any focused stimulus package now pales in comparison with the TARP hedge fund. Of what stimulative impact is $2 billion for weatherization or $10 billion to extend unemployment benefits when the Treasury is giving out chunks of $30 billion or $50 billion at a time to AIG? 

The hedge fund -- while it may have served a purpose in helping the banks stay solvent --threatens to interfere with needed stimulus.

As we have argued at NDN, the unbridled use of monetary tools last year left the Fed empty handed as we enter a recession and a fiscal stimulus is now the primary tool left to policy makers with which to address the slowdown. But we have also argued this fiscal stimulus should work for the long term as well as the short term.

We suggested a substantial share go into clean infrastructure projects that get money out onto the street but also address our long-term energy, environmental and economic challenges. Clean infrastructure projects can not only can create jobs and exert a large multiplier effect, but also pave the way for future prosperity. As President-elect Obama said over the weekend and again yesterday, clean energy is his top priority next year because it has the ability to address so many of our challenges at once. 

However, as long as the Hedge Fund overshadows any proposed stimulus, it will be difficult for Congress to make these needed investments.  What, then, is the answer?

Now that the immediate challenge of stabilizing the banks has been met, Congress and the incoming Administration should reassert their authority over the second half of the hedge fund. A portion of this money might be better allocated to stimulus than loans to banks.  In any case, it should not stand in the way of a meaningful stimulus package. 

The hedge fund may have served a short term purpose, but it is no way over the long term to allocate public funds. The sooner we begin making real investments, not just backstopping financial institutions, the sooner we will get America's economy moving again.

As a new president prepares to take office amidst a receding economy, infrastructure investments are gaining attention as a way to create jobs and stimulate the economy in the short term while also creating the basis for future prosperity. However, U.S. infrastructure, already outdated, has come under new pressure from the combined challenges of climate change and volatile energy prices. As we face up to the competitive demands of the 21st century, it is clear that old, energy-inefficient infrastructure must be repaired, upgraded, or retired and replaced with a new, clean infrastructure to meet the needs of the coming low-carbon economy, the creation of which President-elect Obama has already made a top priority. NDN has long argued that any economic stimulus proposal must be heavily weighted toward clean infrastructure investment.

In that light, NDN is hosting the first in a series of events on clean infrastructure, beginning with a powerful discussion on modernizing the electrical grid tomorrow, Tuesday, November 18 on Capitol Hill.

A Vision for a Modernized Electric Grid: Clean Infrastructure for a 21st Century Economy
Rayburn House Office Building, Room 2322
Tuesday, November 18
12 p.m. – 1:30 p.m.
Click here to RSVP

Featured Speakers include:

Congressman Jay Inslee, Member, House Committee on Energy and Commerce, the Committee on Natural Resources, and the Select Committee on Energy Independence and Global Warming and co-chair of the New Democrat Coalition’s Energy Task Force

Congressman Earl Blumenauer, Member, House Committee on the Budget, the Commitee on Ways and Means, and the Select Committee on Energy Independence and Global Warming

Commissioner Jon Wellinghoff, Federal Energy Regulatory Commission (FERC)

Kurt Yeager, Executive Director of the Galvin Electricity Initiative

Moderated by:

Michael Moynihan, NDN Green Project Director

To attend or for further information about the event, please click here or contact Courtney Markey at cmarkey@ndn.org or (202) 384-1214.

Taking time out from his transition meetings and briefings for his first post-election press interview, President-elect Barack Obama sat down with CBS' "60 Minutes" correspondent Steve Kroft last Friday for an interview that aired last night.

According to Politico's Ben Smith, the coup scored the newsmagazine its highest ratings in nine years. Obama seemed confident in the interview, but very aware of the very big problems that await him as the 44th POTUS:

As policy makers reach consensus on the need for an economic stimulus package, NDN Globalization Initiative Chair Dr. Robert Shapiro and NDN President Simon Rosenberg have posted an essay on the Huffington Post on the need for a Stimulus for the Long Run. In this piece, Shapiro and Rosenberg argue that any proposal should help determine the shape and strength of the economy for the next decade, rather than simply affecting the timing of the next recovery, through investing in the basic elements of growth for the 21st century to create a low-carbon, innovation-driven economy. The full essay follows:

When Congress goes back to work next week, its first job should be another stimulus package for the sinking economy. President-elect Obama also has said he wants another stimulus of his own design after he is sworn in. We know that more stimulus is necessary, because the ongoing financial and housing market crises will very likely produce an unusually long and deep recession. We also need additional stimulus as insurance against the possibility of another economic shock that would worsen the downturn, such as a run on the dollar that drives up interest rates, or worsening housing foreclosures that trigger more failures in financial institutions and further drive down consumer and business confidence.

The path of least resistance to deliver that stimulus is another round of tax rebates for American families, which in theory families would spend to jumpstart demand and, ultimately, the business investments and jobs to meet that demand. However, the catch is that approach is very unlikely to work this time. Most of the rebates from the spring 2008 stimulus were saved rather than spent; and given the recent, sharp decline in confidence, even a greater share of another round would be saved and so provide little stimulus. Moreover, President Obama and Congress can put those billions of dollars to uses that will stimulate long-term growth and income gains much more effectively.

Instead of tax rebates, congressional leaders and President-to-be Obama should look to targeted tax changes and targeted spending increases, with the lion's share going in a new direction: investments in the basic elements of growth for a 21st century economy. The stimulus should and will include traditional measures such as aid to the states facing serious revenue shortfalls and an extension of unemployment insurance. But for its major thrust, President-elect Obama should use the stimulus to drive policy reforms that will affect the shape and strength of the economy for the next decade, rather than simply affecting the timing of the next recovery. The stimulus should be first steps toward delivering on the change that President-elect Obama has pledged to bring to America.

This change should be directed toward creating a 21st century, low-carbon, innovation-driven economy, as the development, spread and efficient use of economic innovations will continue to be the most important factors driving all our future progress in growth, productivity, and incomes. For example, productivity gains are increasingly tied to an employee's capacity to operate effectively in workplaces dense with information and telecommunications technologies. Within a decade, workers who cannot perform in such work environments will be marginalized economically. Therefore, the stimulus should help businesses and workers prepare for the ideas-based economy, through grants to community colleges to keep their computer labs open and staffed in the evenings and on weekends for any adult to walk in and receive free computer training, a plan Obama endorsed as Senator. The stimulus also could include an innovative program to provide inexpensive laptops to every sixth-grader in America and spread broadband installation to schools, local libraries, and human services offices that currently lack it.

There is already a broad consensus on the need to include infrastructure investment in the stimulus, but instead of addressing only roads and bridges, America can also take this opportunity to invest in a new generation of clean infrastructure. The federal government can lead the way, through greening its buildings and vehicle fleets and putting 1,000 megawatts of solar power on its roofs. It also can provide funding to help modernize the electrical grid and build a new generation of light rail systems for urban areas, as well as greater support for research and deployment in renewable energy and energy efficiency technologies, and tax credits and other incentives for greening America's homes and private buildings.

Aside from energy, the other rapidly rising business cost squeezing wages and jobs is health care. To help hold down these costs for the long haul, the stimulus can provide support for hospitals, clinics and physicians to purchase and install the hardware and software for standardized electronic medical records systems. This will serve as a first down payment for 21st century health care reform, and will ultimately reduce costs and promote best-practices at the nation's hospitals.

These are all investments we know we have to make if we intend to make the U.S. economy more efficient, innovative and sustainable. They also are all investments that will ultimate pay for themselves several times over. Congress and President-elect Obama can use this opportunity not only to create more jobs, but to do so in ways that will help drive the development of a real, 21st century workforce and genuine 21st century economic infrastructure. And taking this course by passing a stimulus for change could be an early and important opportunity for him to practice both his new politics and a new form of economic leadership.

For more of NDN's thinking on creating a 21st century economy, please read NDN Green Project Director Michael Moynihan's essay, Accelerating the Development of a 21st Century Economy: Investing in Clean Infrastructure

NDN is pleased to announce that Federal Energy Regulatory Commission (FERC) Commissioner Jon Wellinghoff will join Congressman Jay Inslee, Google’s Dan Reicher, the Galvin Electricity Institute’s Kurt Yeager, and NDN Green Project Director Michael Moynihan on Tuesday, November 18 for:

Developing the 21st Century Economy: Investing in Clean Infrastructure:
Rayburn House Office Building, Room 2322
Tuesday, November 18
12 p.m. – 1:30 p.m.
Click here to RSVP

This event should be an excellent and powerful conversation on clean infrastructure investment and grid modernization. For more information on the event or to RSVP, please click here or contact Courtney Markey.