The Next Big Bubble

Forty-four has a big smile on his face these days. His gigantic subsidy of 30 million new customers for the private health insurance industry was finally passed without help from the wholly owned GOP. Passage of so-called health care reform will no doubt allow him a second term in office since he accomplished what no other Democratic president was able to do in the last century. The next subsidy on the list of corporate America is the $1 trillion in loan guarantees to the nuclear power industry. A large part of the administration's energy plan to replacing fossil fuels relies on revitalizing a moribund nuclear power plant industry. As US Person has reported before, the administration and its allies in Congress want to build 100 new nuclear generating stations in the United States {"nuclear renaissance"}.  Currently the Nuclear Regulatory Agency is reviewing applications for 21 new reactors.  The major problem with this approach is that construction of new plants has flat lined since the early 1980s because of the ballooning construction costs of complex nuclear reactors.  Utilities are reluctant to undertake the risk of expensive nuclear projects without federal subsidies in the form of loan guarantees.  The Alexander-Webb bill (S.2776) proposes up to $1 trillion in new guarantees and places the risk of default, estimated at 50% by the CBO, in the form of subsidy costs on the taxpayer.  Current legislation requires the utility to pay subsidy costs.  It also removes an important protection for the taxpayer who is providing the capital. Under the Energy Policy Act of 2005, the United States has first lien rights in the case of a loan default and the assets are sold to satisfy debts.  The new legislation requires that the US share liquidated assets with other investors, often foreign companies.  The loan application review period is truncated to six months from the date of submission, a short time to approve loans of such complexity, and in most cases before the reactor design is finalized or realistic cost estimates are available.

All of the administration's accelerated emphasis on making nuclear power affordable ignores the fact that a basic problem of nuclear power generation has not yet been permanently solved.  The only national high level waste depository at Yucca Mountain, Nevada has been denied budgeting and is no longer slated to go into operation.  All high level waste in the US is stored above ground at nuclear facilities, a temporary solution that is vulnerable from a security standpoint.  The way around this problem is a bureaucratic word game worthy of Wonderland.  The Nuclear Regulatory Agency has a rule which basically says they will assume for planning and regulatory purposes that a permanent national repository will be operating by 2025. No other repository site is currently under consideration to replace Yucca Mountain.  The rule is called inappropriately, the "Waste Confidence Rule".  The proposed legislation will codify this rule, thereby prohibiting the NRC from rejecting a nuclear plant project for lack of capacity to dispose of radioactive waste in "a timely manner".

Another $4 billion in direct subsidies to the nuclear industry are proposed for such things as workforce training, research on extending the life of current reactors, and a program for developing small, fast reactors.  Most governments and companies have had negative experiences with developing small reactors since they do not achieve economies of scale.  In contrast to this largess for an expensive, dirty mode of power production, the bill proposes only $6 billion over 10 years for clean alternative energy sources such as liquid biofuels, solar electricity, improved batteries, and carbon capture technology.  The reason for these misplaced priorities are many, but the prime driver is that because nuclear power plants are expensive to build, the industry uses political influence to collect a lot of utility rate payer and government money to socialize the risks of construction and operation. It is a strategy familiar to Wall Street.

[photo: legalplanet.wordpress.com]

Chart of the Week: Death of a City

The chart pretty much says it all: Detroit is dying.  With the slow death of its industrial base, the auto industry, the middle class has departed.  The current average home price is an eye-popping $7000.  An example of what has happen to real assets in Detroit reported by the Wall Street Journal is the home built by Clarence Avery, a Ford Motor executive who conceived of the auto assembly line.  The five bedroom home sold for $250,000 in 2005. A woman bought it for $189,000 with a $200,000 subprime loan. She defaulted. The deteriorating home was bought by a non-profit which renovated it and sold it for $10,000. Of course the disappearance of the tax base has severe effects on city services.  Recently Detroit announced the closure of one-quarter of its schools because it is out of property tax money. Crime has dropped recently, but in 2007 Detroit was the sixth most dangerous large city in America according to the FBI. Over 900,000 people have left Detroit since 1950, about half the city population.  As the chart below shows the income per capita by city census tract in 2000 is less than $20,000. The city is now 81.6% black and only 12.3% white.

Great Britain To Ban Wild Animals in Circuses

After centuries of being exhibited to man for his amusement, and suffering often appalling treatment, the British Environment Minister Jim Fitzpatrick is reported by The Independent to be favorably considering a ban on wild animals continued exploitation by circuses.  Consultation with the British public shows that a great majority back the idea. Currently four circuses in Great Britain use wild animals in their shows.  The British Veterinary Association also thinks a ban is good idea.  Minister Fitzpatrick said the animals in captivity will be looked after when their performing days are over. "Nobody wants to see them simply destroyed, and we will work with all concerned to secure a future for these animals.", the Minister was quoted as saying. A Bristol University study last year found that circuses, often economically distressed, fail to provide basic animal welfare needs such as space and animal socialization. Clearly the days of being entertained by captive animals, a western cultural mode since the Coliseum of imperial Rome, have finally past.

The Last of the Haditha Killers Will Go Free?

Update:  In a surprising decision on Friday, the presiding officer of Staff Sergeant Frank Wuterich's court martial on charges of voluntary manslaughter and dereliction of duty refused to dismiss the case saying there was not enough evidence that the legal process was tainted by command influence.  Lt. Col. David Jones said defense attorneys had failed prove two marine generals were influenced by the presence of a top aide who had investigated the incident at meetings where the case against Wuterich was discussed.  Trial is now scheduled for Sept. 13th.

Frank Wuterich, the last Marine to face charges of manslaughter arising from the Hadditha massacre {"Haditha"} will undoubtably go free after the judge in his court martial ruled on Wednesday that there was possibly "command influence" prejudicing his case.  A similar finding allowed another Marine, Lt. Col. Jeffery Chessani, to escape punishment for the incident in which 24 Iraqi civilians were killed, some in their beds.  Eight Marines were charged with murder or failing to investigate a crime.  Six had charges dismissed or withdrawn, one was acquitted.  Four years later, Wuterich is the last awaiting disposition of his case.  He was the squad leader when a bomb killed a Marine and injured two in the Iraqi village in 2005.  During a house search for responsible "insurgents" the Marines killed 19 unarmed civilians in three houses.  It is a sorry record for the Marines, and a crushing finale for military prosecutors attempting to impose accountability for crimes committed by American military personnel during another unnecessary, ugly war.  Wuterich's attorney said after the favorable ruling his client was in "good spirits", and that Wuterich plans to make the Marines his career.  Good choice, as there is not much demand for killers in the civilian economy.

Le Shorter: The Modern Pontius Pilate

0:11--0:16 (ignore ad):

'Toontime: The Nativist Fringe Caged

[credit:  Matt Davies]

Wackydoodle axes:  Would 'ya like an automatic with that?

Ten Democrats have been orally threatened or had their offices vandalized in reaction to the passage of the healthcare bills.

Obama Fails to Protect Right Whales

The Administration promised conservationists it would protect marine life from the Navy's lethal use of mid frequency range sonar after the Supremes approved an exemption from environmental laws on national security grounds.  But the Navy is not on the same page, and is preparing to build a sonar training ground just outside the only known calving ground for the critically endangered right whale.  Only about 300 Atlantic wright whales remain.  Environmentalists were successful in getting marine speed limits and re-routing shipping lanes off the Massachusetts coast to protect the mammals on their migration south to northeastern Florida calving grounds{"right whales"}.  The proposed range, spanning 500 nautical miles, may be crisscrossed with acoustic devices and cables emitting sound shown to be lethal to marine mammals.  The Navy chose the site without conducting the most basic research on biological impacts of its proposed plans.  Once again the US military exhibits its almost autistic disregard for the environment.  NRDC is attempting to block the Navy's plans in federal court.  The Administration made a commitment to identify sensitive habitat where mid-frequency sonar endangers whales, dolphins and porpoises, but it apparently failed to get the Navy on board.