Regulating Power Usage in the Very Near Future

An article in the NY Times on Jan 11th talked about a proposal in California that would allow state regulators to have the emergency power to control individual thermostats, changing the temperature settings through a radio signal in all new of substantially modified houses and buildings. This would allow them to reduce the electricity demands during peak periods if it was necessary to avoid rolling blackouts. Customers could override the utilities' suggested temperature settings, but in emergencies the utilities could override the customers' wishes. The proposal is expected to be approved next month.

As you might expect, there has been a strong negative reaction to this. "Shades of 1984" was a common theme, thought the novel "1984" was mainly about thought control, not temperature control. Much of the negative reaction was predictable and understandable. It is troublesome to see aspects of denial of the power problem in some of the attitudes though. The situation is serious, and is likely to get worse each coming year. Some sort of change in the way people use electrical power is absolutely required, one way or another.

A compromise that is much more acceptable to most people is surely possible. It is likely to take both a carrot and stick approach. The carrot - significant discounts to people who voluntarily sign up for such control in emergencies. This could apply to old as well as new houses. The stick - a substantial increase in the price of electricity during critical peak periods for people who do not participate. The stick may have to be substantial, perhaps a 10x increase in the price of electricity during those peak periods. If rolling blackouts still do happen, there will be a tendency to blame those not participating with the program, generating strong social pressure for people to behave responsibly and voluntarily accept the carrot part of the deal.

Yes, this is not the way things worked as we were growing up. But yes, it is something we can and will get used to.

The Economic Legacy of the Last 7 Years

Sorry if the following post is a bit of a downer, but after listening to the Republican debate recently, I'm convinced that many of us are living in deep denial.

If you're interested in lower taxes, you should also be interested in the "tax burden". In reality we eventually have to pay, one way or another, for whatever our government spends. This is our long term "tax burden". If you think that by keeping our current taxes low you somehow reduce our overall tax burden then you're just fooling yourself. In reality we're just shifting around our payment schedule. We still have to pay for whatever our government spends. If we don't do it now, then we'll also have to pay for all the interest on the debt we're running up. The claims that the Bush administration has been keeping our taxes low is extremely disingenuous. In reality, our tax burden has sky rocketed during the last several years because of a lack of responsibility by both the President and our Congress.

To quote the conservative columnists Andrew Sullivan:

The proud irresponsibility is the most striking thing - the obliviousness to the future, to the debt the next generation will carry, to the huge increase in the power of government over people's lives that Bush has engineered. Joe Stiglitz is surely right: The economic effects of Bush's presidency are more insidious than those of Hoover, harder to reverse, and likely to be longer-lasting. There is no threat of America's being displaced from its position as the world's richest economy. But our grandchildren will still be living with, and struggling with, the economic consequences of Mr. Bush.

Got that? OK. But now it gets worse...

Beyond the tax burden of paying for what we have already spent, there is the "fiscal exposure" of paying for what we have committed to spend in the future on such things as medicare, social security, benefits to wounded solders, etc. This is where things get really scary.

Now quoting David M. Walker, the Comptroller General of the United States and head of the GAO: (hat tip: Andrew Sullivan for this quote)

"If the federal government was a private corporation and the same report came out this morning, our stock would be dropping and there would be talk about whether the company's management and directors needed a major shake-up."

"The federal government's fiscal exposures totaled approximately $53 trillion as of September 30, 2007, up more than $2 trillion from September 30, 2006, and an increase of more than $32 trillion from about $20 trillion as of September 30, 2000... This translates into a current burden of about $175,000 per American or approximately $455,000 per American household."

There you go folks, the economic legacy of the policies followed by the last 7 years of our national government is an additional bill for $32 trillion. As the main source of income for my family of four, my personal share of that bill is $455,000. When Alan Greenspan retired from the Federal Reserve, he lamented at the lack of willingness of our political leaders to address the coming tsunami. For all practical purposes, we are as a nation technically bankrupt and living in denial about it.