How a Well Connected Industry Gets a Free Ride

I love the business of business, especially entrepreneurship. However, nothing is worse than a free ride on our tax money. In the NY Times article, "Energy Bill Aids the Expansion of Atomic Power Plants," there's a little known provision tucked into an energy bill that has government guarantees for the nuclear power industry. Essentially, the "Department of Energy would be allowed to guarantee 100 percent of the loans and up to 80 percent of the total cost to build a reactor." That's to the tune of $25 billion!

What? So utilities get guaranteed loans. No risk for them. Pay too much, pick the wrong technology, overestimate the market - hey no problem. We the taxpayer will take care of you. All of us entrepreneurs have to schlep on bended knee to investors and banks who assess their investments based on risk. But the nuclear industry gets a free ride. How wonderful is this? Be an industry exec and get paid a lot to take no risk.

I'm all for incentives and sometimes a subsidy if it is in the national interest. Nuclear is a part of the energy equation - especially in a carbon threatened world. However, this is absolute bunk.

No risk, no return - last I checked that's the difference between business and government. If companies like GE and Exelon need a free ride, then there should be a price for it. If you need a government guarantee to do business, then you need to take a government salary. Or you need to give up a commensurate amount of equity warrants to the Social Security trust fund. If the taxpayer is going to fully guarantee a loan to build a reactor, then there needs to be equity upside for the risk the taxpayer is taking in return for our risk and the lower interest rate from lenders.

Now don't start me on how big money has bought our politicians...

Sicko

I had the opportunity to watch Sicko during vacation. It was very interesting to see Michael Moore's treatment of a subject that affects so many personally and is also now 1/7th of the US economy. What is very striking is how so many are caught up in denial of coverage and reimbursement. This is contrasted with the examples of Canada, UK, France and Cuba where medical coverage is free and in the movie - effective for the citizenry.

I was fired up enough about the film to do something about it. Given that so much of the US economy is intertwined in healthcare, it is unlikely that the single-payer government run system will actually take place anytime soon. But something is coming from my company that will enable Americans to get better care at lower costs - you'll see in the next 6 months.

Lou Dobbs the Demogogue

While working I had the unfortunate opportunity to listen to Lou Dobb's immigration demogoguery about Hillary Clinton's "ties to India" due to work with the Congressional Indo-American causus. He makes it sound like the Indians (italics for emphasis) are stealing jobs from Americans for getting H1B visas. And, oh many of them, stay. Last I checked, getting an H1B confers no citizenship rights, but you still have to pay US taxes. Many of these Indians have graduate level educations in science and engineering and stay to create new American businesses. Hey, they could just stay in India and start the businesses there. What is worse is the way he says Indian, like it's some kind of slur like a conservative saying "liberal."

Oh, by the way, after the attack on Clinton in the trailer, it was pointed out that almost 37 Senators and 118 Congressmen are the Indo-American caucus equally split between Republicans and Democrats. Yes, it is a good idea to align with a successful ethnic group and a large, fast growing democracy.

Let's be real Lou, globalization is all around you, being a curmudgeon is getting old.

How to Force Pop Ups

It's interesting how 2 properties like the nytimes.com and boston.com (Boston Globe) both are owned by the same parent, yet one makes more off of me than the other. Due to the quality of the writing, the nytimes.com gets a lot of more of my viewing time, yet I see more of boston.com. Here's why, I allow pop-ups from boston.com because they have cool slide shows and polls of the Red Sox and Patriots. It's not video, but I get to interact with the content, I enjoy seeing how Ortiz gets a 'B' for a .321 average vs. Pedroia an 'A' for a .315 average (it's all because Ortiz doesn't have 20 home runs). With the NY Times, there's no compelling reason. With Boston.com, they have in-depth coverage of my favorite teams, so I'm willing to put up with those ridiculous expanding ads and fly-ins. I actually don't mind it as long as they keep giving me detail about Youk and Pedroia.

I have all the necessary ad blocking software in Firefox, Norton, and a spyware package.

So there's the lesson of the day: you too can push your way into the users face if your publication can produce compelling content in a useful format.

US Trade Deficit Marketing

Anyone who follows business and news constantly hears about the fast growing US trade deficit with the world. We are led to believe that this is a consequence of a highly developed post-industrial economy. Given the growth of China and its labor cost advantages, it is only natural that goods would be produced there and shipped to the US. Consumers benefit through lower prices and generally increase their skills to a more service-oriented economy.

While this makes some logical sense, the data does not support this point of view. Go to the last page of the Economist (July 7, 2007) and look at some of the tables:

Country Current Account GDP Budget Balance
($ bil) (%) (% GDP)
United States -803 -6.0 -1.4

Japan +187 +3.4 -4.4
Germany +168 +4.9 +0.3
Britain - 93 -3.2 -2.8

Those are large developed economies. Now some fast-growing ones...

China +250 +8.1 -1.3
India - 10 -1.8 -3.3
Russia + 87 +5.7 +2.4

Oh yes, and here's the big winner...

Saudi Arabia + 95 +21.4 +16.6

The US has gone for a creditor nation to a debtor nation. Imports exceed exports. There's a significant budget deficit because the deficit does not include future Social Security and Medicare liabilities. Meanwhile developed economies like Germany and Japan have fund inflows greater than it's deficit. Look at the numbers. They are fully developed nations that are net exporters. Unlike the US, they have retained their manufacturing prowess. The US is a great economy - still the greatest and most innovative in the world, yet it is ceding its advantage due to it's twin deficits. For now, trading partners are balancing US accounts by purchasing Treasury bills. However, the US cannot rely on this forever. When countries lose interest, the US will need to keep it's interest rates artificially high to attract foreign investment. That will hurt US businesses and consumers.

The above data shows that great economies do not need to run deficits of any type. It also shows that fast growing developing economies do not necessarily need to run large surpluses. However, those with large surpluses like China and Saudi Arabia can exert pressure on the countries they have their money in.

So don't buy into the marketing. The US can do much better.