Wind Farms in the North Atlantic
August 26, 2022
Electric Power Generation v. Commercial Fishing
On August 26, 2022, Fox News (Jesse Watters Primetime) produced and broadcast over public airwaves an attack piece on offshore wind farms. It alleges that Democrats have conspired against the private commercial fishing industry to decimate historic fishing grounds; deprive them and nearby port communities of their legacy commercial activities; and potentially destroy entire regional economies.
Background:
Wind is one of the cleanest energy sources available, and some scientists insist the U.S. is sitting next to a gold mine. A study published in 2009, “Global potential for wind-generated electricity” (PNAS: Proceedings of the National Academy of Sciences of the United States of America) firmly established wind power as the most effective and efficient means to generate sufficient electrical power to meet both present and future needs.[1]
A subsequent study conducted in 2017[2] found that wind speeds over the oceans could allow offshore turbines to generate far more energy than land-based wind farms – with the North Atlantic, in particular, theoretically able to provide enough energy for all of human civilization.
In tapping into wind as an energy source, the U.S. has lagged behind the U.K. and Europe for decades. Two of the largest offshore wind farms in the world are the London Array and the Netherlands’ Gemini wind farm.
The U.S. is beginning to catch up. The first offshore wind farm in the U.S. began generating electricity in late 2016. It consists of five, 6-MW (megawatt) Haliade-X turbines supplied by GE Renewable Energy linked through a submarine transmission cable into the New England grid. Located about 3 miles off the coast of Block Island, RI, this wind farm will generate enough electricity to power 5,000 homes on the island and to meet around 90 percent of its total electricity demand. [3]
The Current Domestic Situation: The Bureau of Ocean Energy Management was created in 2011, and it is poised to review at least 16 offshore wind plans for potential approval in the next three years, up from two total approvals since the agency was created.
The Biden administration apparently has ambitious plans to open up vast swaths of coastline in order to generate 30 gigawatts of offshore wind energy by 2030. Energy companies are stepping up: Six leases off the New Jersey and New York coasts sold for $4.3 Billion in February 2022, the most lucrative wind lease sale in U.S. history.
Among other cases, Oregon officials are asking BOEM to delay a planned lease sale next year over concerns about its potential impacts on commercial fishing.
The commercial fishing industry has real and legitimate concerns which need to be investigated and addressed, honestly and thoroughly.
Interim Conclusion: This is a very complex issue which needs input from cool heads; full transparency; and no further publicly broadcast emotional diatribes. Like most issues today, we need to allow real experts to develop and distribute a solid strategy which achieves optimum current and future outcomes for our society as a whole.
[1] This 2009 study was supported by National Science Foundation Grant ATM-0635548; the authors represent an international multidisciplinary team of scholars.
[2] “Geophysical potential for wind energy over the open oceans”; Carnegie Institution for Science, Stanford, CA 94305.
[3] Block Island Wind Farm has a peak capacity of 30 MW (megawatts) and is expected to produce around 125,000 MWh (megawatt-hours) of electricity annually.
Senator Sinema and Carried Interest
August 17, 2022
Political Malfeasance in Action
I grew up in the 1960’s in Buffalo, NY where it seemed that candidates for election to public office couldn’t get nominated until they could prove their ability to attract illegal political contributions. Over my professional career, I spent significant time in other northeast states, counties and cities where political corruption was often the norm.
Most of the corrupt elected officials I observed were guilty of getting their driveway paved; their house painted; maybe a new roof. Not good, not appropriate, and certainly, not acceptable.
The recent behavior of Sen. Kyrsten Sinema (D-AZ) relative to the Carried Interest federal tax loophole puts the actions and behaviors of these historic elected officials in NY and CT into the category of ‘fixing parking tickets’.
The despicable and nefarious posturing by Sen. Sinema has blessed Carried Interest, sometimes known as ‘the cockroach of tax breaks’, allowing it to survive another potential assault by Congress.
The proposal to increase the holding period requirement to qualify certain income paid to investment bankers for the lower Carried Interest tax rate was removed from the landmark ‘Inflation Reduction Act’ of 2022 (H.R. 5376) recently passed by both the Senate and the House and signed into law by President Joe Biden on August 16, 2022.
The “compromise” to remove Carried Interest was demanded by Sen. Kyrsten Sinema (D-AZ) which she justified on a complex and convoluted set of criteria, and which potentially might be related to the $1 Million in campaign contributions she received over the past year from private equity professionals, hedge fund managers and venture capitalists whose taxes would have increased exponentially under the original plan.
The concept of Carried Interest dates back to the 16th century, when ocean-going ship captains would often take a 20 percent “interest” of whatever profits were realized from the cargos they carried. This approach is logical and defensible on the risks to life, property and personal capital undertaken by ship captains.
In 21st century America, the meaning of Carried Interest has evolved to describe a tax loophole — an income tax avoidance scheme — which allows some private equity and hedge fund investment bankers to classify large amounts of their compensation related to performing services (i.e. managing and/or investing other people’s money) as investment gains, which substantially lowers the amount they are required to pay in taxes.
Today’s Carried Interestis essentially a payment (bonus or commission) for investment services that is taken out of the profits of the money managed for investors. Private equity firms use pooled money from large institutional investors (pension funds, college endowments, ultra-high net worth individuals, etc.) to acquire controlling interests in struggling, underperforming or undervalued companies. When the investment are made, these acquired entities agree to pay the private equity firms Carried Interestout of the investment profits on top of management and other fees.
Under our current tax law, when the carried interest income is paid out of the private equity firm to individual partners, directors, etc. it is taxed at the preferential (‘capital gains’) rates granted to investment income, even though the income represents compensation for services. In all other contexts, compensation income – salaries, bonus, commissions, etc. – is taxed everywhere else as ordinary income.
Investment professionals often are required to contribute capital if they are eligible to receive carry, although it varies by firm and by position in the hierarchy (from 23% of associates/senior associates to 71% of managing partners). Essentially, the Carried Interest tax loophole acts as a magic wand to turn ordinary compensation income into preferentially-taxed capital gains income for a few thousand specially entitled individuals each year.
Private Equity (“PE”) is a $4.5 Trillion industry which tends to follow a predictable model: Use very high levels of debt to take control of underperforming (or undervalued) companies and then extract as much value as possible over a short- to intermediate time frame.
One of my favorite movies, “Other People’s Money” (1991: Warner Brothers [directed by Norman Jewison]; starring Danny DeVito and Gregory Peck) almost perfectly illustrates the potentially powerful impact of leveraged debt strategically deployed against a weak management team. In the film, the end result is: (a) closure and liquidation of New England Wire & Cable Company, a boring multi-generational family manufacturing business; (b) the loss of hundreds of decent jobs in a small American city; and (c) millions of dollars of ‘pirated booty’ transferred to anonymous private equity investors, with a mighty fine Carried Interest reward paid to Danny DeVito (the investment banker).
Zero value added to the overall U.S. economy.
Devastating value lost to a small American city, its residents and the regional economy.
Sure, the investment banker (Danny DeVito) took home a fine bonus. He probably was able to buy a nice airplane and maybe a vacation home in the Hamptons.
Meanwhile, the wire and cable products formerly supplied by the now defunct domestic company now are being sourced from a foreign firm. The American city where the former Wire and Cable business was located lost tax revenue which had formerly been used to support local schools and public works. And, local families abruptly lost their incomes, and their homes potentially went into foreclosure.
Most alarming: U.S. taxpayers subsidized the whole mess because of this crazy, foolish and irrational tax break known as Carried Interest.
Some will say that the movie, “Other People’s Money” is a 1991 dinosaur which has no relevance in 2022.
Yet, the devastation continues. In our current environment, retailers are particularly vulnerable to leveraged buyouts, and they provide the most visible examples of companies which have been acquired, pillaged and wrecked by private equity firms.
In January 2020, the New York grocery chain Fairway filed for its second bankruptcy in less than four years and announced plans to sell off its stores, due to several efforts by PE firms to extract value from the franchise. The Fairway failure joins a long list of casualties that includes: Sears; Toys R Us; Payless ShoeSource; and Sports Authority, among many others.
< ==== >
In theory, PE firms snap up underperforming companies using ‘patient capital’; they bring in professional managers to revamp current operations; and then sell the companies through a Public Offering to generate a healthy return.
In practice, the PE industry revolves around deals known as leveraged buyouts, where the PE investors put up a small amount of their own money to purchase a company and borrow the rest. The acquired business becomes responsible for repaying the debt, which puts an immediate strain on cash flows.
In their quest to generate cash and improve operational efficiency, PE firms often: lay off workers, and cut pay and benefits to remaining workers; they sell off owned real estate and lease back; they sell trademarks and other ‘off balance sheet assets’.
PE firms sometimes extract cash using “dividend recapitalizations” where they use the acquired company to borrow additional money which is then used to pay investors. Beyond that, they often charge the businesses they acquire millions in ‘management fees’.
< ==== >
Shifting the treatment of so-called Carried Interest income from capital gains to ordinary compensation income could raise between $1.4 Billion and $18 Billion annually from income tax on a very small number of investment bankers.
Most informed Americans refer to the lower tax rate on Carried Interest as a loophole that allows already wealthy private equity, hedge fund and other investment managers to pay a lower tax rate than the majority of their employees and other American workers. Once they are fully informed, a significant majority of voters across the political spectrum support legislation that would close this loophole.
“It’s a real rich benefit for the wealthiest of Americans,” said Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center. “Why should a private-equity manager be able to structure his or her compensation with low-taxed gains? That seems wrong.”
Sen. Sinema was elected to the U.S. Senate by voters in Arizona to represent their interests. It’s hard to see how continuing this awful Carried Interest loophole is in the best interest of anyone in Arizona, other than to Sen Sinema herself because it seems to provide a rich and reliable source of political contributions to help ensure her continued reelection.
And that also seems wrong.
Remember the 2020 Recession?
August 11, 2022
I don’t either.
Just because you and I don’t remember the 2020 Recession, that doesn’t mean it didn’t happen.
The official arbiter of recessions — the Bureau of Economic Research — says there was one.
When Donald Trump took office in January 2017, he inherited an economy in its 91st month of economic expansion following the end of the Great Recession in June 2009. That expansion continued into 2020, becoming the longest on record, peaking at 128 months in February 2020.
The National Bureau of Economic Research officially recognized the Recession of 2020 as the shortest on record at just 2 months, with the trough of that recession occurring in April 2020.
One milestone which helps to mark the 2020 recession is the price of oil. During the month of April 2020, the price of a barrel of West Texas Intermediate was absolutely erratic, actually closing Negative at (Minus $37/bbl) on April 20, 2020. [Was gasoline free that day? I don’t recall.]
Back to January 20, 2017, Trump’s Presidential Inauguration Day.
Paul Ryan, a Republican from Wisconsin, was serving as Speaker of the House. Mitch McConnell, a Republican from Kentucky, was the Senate Majority leader.
Ryan was first elected to the House in 1998 at age 28. He developed a reputation as a no-nonsense deficit-hawk fully focused on reducing entitlements and reducing taxes. Ryan had been serving as Speaker of the House since 2015.
The 2017 Tax Cuts and Jobs Act (TCJA) was Paul Ryan’s swan song, eagerly supported by Trump and most congressional Republicans.
Unfortunately, it was exactly the wrong time to enact this complex piece of legislation, primarily because it relied on untested assumptions at a point in time when the U.S. was riding the tail end of the longest economic expansion in history. It created massive increases in our national debt; it favored investment increases in oil and related industries (which to some appeared to be a means to curtail pending increases in oil prices); and exuberant expectations that repatriation of corporate profits parked offshore would be used to create domestic jobs turned into a massive stock buyback across the market.
In early February 2018, Paul Ryan began to reflect on the true consequences of the TCJA. He tweeted, “Julia Ketchum, a secretary at a public high school in Lancaster, Pennsylvania, said she was pleasantly surprised her pay went up $1.50 a week. She didn’t think her pay would go up at all, let alone this soon. That adds up to $78 a year, which she said will more than cover her Costco membership for the year.”
In April 2018, Ryan announced his intention to retire from Congress on January 3, 2019 — the end of his current term — thus ending a 20-year career representing his constituents in Wisconsin — so that he could spend more time with his family.
Left to its own devices, the 2017 TCJA may have created an unchecked economic calamity.
Then came the Covid-19 Pandemic which turned into an unforeseen international societal and economic tragedy – and clearly was the trigger which caused the 2020 recession. Yet, the impacts of Covid didn’t begin to surface until 1st quarter 2020, so there is a 24 month period following the January 2018 introduction of the TCJA which economists are now examining to help create real context around current (mid-2022) economic uncertainties.
Even a neophyte like me can add the 2022 Russian invasion of Ukraine to: (a) the long-term economic damage created by the TCJA; (b) the Covid wild card; and (c) the economic devastation of Trump’s tariffs, particularly on our agriculture sector. When we spread the numbers, we can begin to see an almost perfect recipe created under Trump’s watch sufficient to decimate any economy.
Despite the open hostility and recalcitrance of elected Republicans currently serving in Congress, I must give Joe Biden and the Democrats a 5-Star rating for refusing to capitulate, and for keeping the ball moving forward.
The Insidious Impact of Cults on Society
August 9, 2022
The American Psychological Association (APA) associates Cult Leaders with those who exhibit narcissistic psychopathy in their actions and behaviors.
Cult leaders usually are psychopaths with a desire for power who often take ideas from politics, religion and psychology to fulfill their purpose. Through mind control, they are able to filter their thoughts and behaviors into “fanatical faith and belief” among followers.
According to a number of APA-approved research studies, “a destructive cult is an authoritarian regime, which uses deception when recruiting as well as mind-control techniques to make a person dependent and obedient.”
Some have said that the Church of Scientology resembles a cult, perhaps generally benign rather than overtly destructive.
L. Ron Hubbard founded the Church of Scientology in 1954, and he struggled for many years to gain recognition for it as a legitimate religion. He was often at odds with tax authorities and former members who accused the church of fraud and harassment. Hubbard died in 1986, yet he created an infrastructure which is more powerful and resolute today than any time prior.
Al Qaeda was founded in 1988 by Osama bin Laden using a decentralized organizational structure which has survived his death. Most agree that Al Qaeda generally fulfills the criteria for a destructive cult, and a priority within the war on terrorism should focus on application of what we know about destructive mind-control cults.
Experts advise that the best strategy to stop cults from expanding and taking control of large segments of world population is to develop a deep understanding of the psychological aspects of how people are recruited and indoctrinated so that recruitment can be impeded and ultimately stopped.
History tells us that Adolf Hitler and the Nazis were a destructive political cult, led by a man with an extreme case of malignant narcissism, defined by a ferocious sense of ‘self’.
Malignant narcissists – sometimes described as Narcissistic Psychopaths — exhibit no empathy. They believe they are above the law; they frequently make threats or speak of committing violence. They’re often paranoid; they demand complete loyalty; and they rarely trust anybody.
Adolf Hitler, Vladimir Putin, Jim Jones and Sun Myung Moon are often cited as malignant narcissists, some more a threat to the continuation of the human race than others.
The most recent reactions to the FBI raid on Mar-a-Lago from Fox News and among Donald Trump’s followers confirm that Donald J. Trump must be a cult leader.
“These are dark times for our Nation, as my beautiful home, Mar-a-Lago in Palm Beach, Florida, was raided, and occupied by a large group of FBI agents,” Trump complained in a statement sent out via email by Trump’s Save America PAC. Never bashful in his quest to amass the largest political action fund in world history, his statement concluded with a request for donations: “Please rush in a donation IMMEDIATELY to publicly stand with me against this NEVERENDING WITCH HUNT.”
Almost immediately, Trump’s followers – ignoring the possibilities that Trump was flaunting U.S. laws and regulations – began to circle the wagons, claiming Trump is being unfairly persecuted by the Biden administration and other hard-left liberals. Alina Habba, one of Trump’s lawyers, spent time on August 9 with Jesse Watters on Fox News claiming that the entire FBI operation essentially was ‘illegal, immoral and perfidious’.
We only need to look back to the early morning of September 11, 2001, when 19 terrorists from the religious extremist cult Al Qaeda hijacked four commercial aircraft and crashed two of them into the North and South Towers of the World Trade Center complex in NYC. Then, a third plane crashed into the Pentagon in Arlington, VA. Passengers on the fourth hijacked plane, Flight 93, fought back, and the plane was crashed into an empty field in western Pennsylvania about 20 minutes by air from Washington, D.C.
Nearly 3,000 people died. It was the worst attack on American soil since the Japanese attacked Pearl Harbor in 1941.
The terrorists from 9/11/2001 failed to destroy the foundation of U.S. society by force. Undeterred, it seems that these and other external forces have focused on indoctrination as a means to destroy our nation.
The growth of the Trump Cult – estimated to be as large as 35% of the U.S. population today – is proof that constant and focused messaging can be a powerful tool to alienate people who feel disenfranchised, and a majority of those people look like me.
I’m now retired; an over-65 white male who fought it out for 4+ decades to survive and prosper in an ever-changing workplace environment. It would have been easy for me to give up and blame the changes and challenges on women; people of color; immigrants; or ‘government over-reach’.
In fact, most GOP effort over the past several years has consisted mostly of new state and local election laws that have restricted voting in ways that often place a disproportionate burden on Black and Latino voters.
The Trump Terrorists have been programmed to zero in on racial, ethnic, religious and gender differences on the notion that entitled white men could be deprived from their rightful legacy.
The very origin of the Trump campaign is “Let’s Make America Great Again” referencing back to the 1956-57 era when virtually every white male high school graduate could transition into a family wage job – with GM or Ford; in government; mining; agriculture; transportation; construction; or a myriad of other industries. Those were the days when a typical CEO made 20 times the salary of the average worker.
In 2021, S&P 500 CEOs averaged $18.3 Million in compensation — 324 times the median worker’s pay.
This inequity is the foundation of the real American dilemma. It has nothing to do with ‘deep state’ or a ‘swamp’ in D.C. It is really grounded in the Dark Money culture which pervades our elections. Trump has plenty to say, but he has never addressed the real issues which haunt American workers.
Meanwhile, the Cult of Agent Orange is alarming, and it threatens to annihilate our entire nation.
We can do better, folks, and we must do better if we intend to survive as a nation.
walrus51 