The Gap Again Widens

 The September trade numbers are out and America’s Trade deficit increased significantly since August. Not only did it increase, but it made the largest percentage increase since February of 1999. Of course, part of that dramatic note is due to the contraction that resulted as part of the economic down-turn.

An AP article (see: http://www.google.com/hostednews/ap/article/ALeqM5gNiyJ905Ho0Ur96V2TQhsBX19lGwD9BUNGF80) sites authorities who suggest that the increase in energy prices is outstripping the benefit gained in the export sector by a falling dollar.

As President Obama travels through Asia this will no doubt be a subject of discussion. A Chinese Yuan that is kept artificially low is credited with a not insignificant portion of the problem. The Chinese have indicated a willingness to let the Yuan adjust a little, but are, not unexpectedly, quite concerned about the state of the dollar (being holders of vast quantities of dollar assets.)

Source: www.kremlin.ru

The venerated first Strategic Arms Reduction Treaty (START I) will expire on December 5, 2009. The importance of this treaty lies not merely in the fact that it reduced the numbers of nuclear warheads and the platforms on which they reside in both the Soviet and US arsenals (later the five weapon holding successor states of the Soviet Union and the US.) Perhaps more important were the unprecedented levels of verification and information exchange incorporated into the Treaty- a codification of President Reagan’s often quoted “trust, but verify” line.

Currently, negotiations are underway to replace the expiring START. Reports indicate that there are two major outstanding bones of contention. The first involves the issue of ground-based mobile launchers, which the Russians have but the US does not. The US would apparently like to see more control over them, but the Russians object to what they see as a unilateral concession. This may be a gambit in search of a concession on the US side. The second issue deals with the details of the allowable numbers of various weapon platforms.

There has been talk in the US Senate of extending START I six months because, even if a new treaty is concluded in the next three weeks, it won’t be ratified and enter into force until much later.

When I started studying the question of how nuclear power’s expansion was likely to transpire, I, like many, took it as  a given that there would be a substantial global expansion of nuclear power plant construction. I expected the “renaissance” would include both growth in countries that have long had a near de facto moratorium on plant construction (e.g. the United States) as well as some of the more promising aspirant countries that have not previously had commercial nuclear power such as Indonesia and Turkey. While I never believed that most of the states clamoring for nuclear energy would achieve it in my lifetime, I did expect a significant swing. After all, with a price on carbon and renewables not ready to take a chunk out of king coal at an affordable cost, nuclear power seemed to stand to be a big winner from climate change.

Today I am far less sanguine about an expansion that could be reasonably be termed a “global renaissance of nuclear power”. Perhaps it can be said that Asia is experiencing a nuclear boom. 57%  of the plants currently under construction are being built in just five Asian countries (China [over 25% of the total alone], India, Japan, South Korea, and Taiwan), and if you add Russia you have accounted for almost 3/4ths of the current construction. However, beyond rhetoric and political attempts to signal support for nuclear energy, there is little evidence of a full-fledged renaissance yet. The graph below shows the number of power plants being brought on-line each year, and the number of countries in which plants were brought on-line.

Just recently, the US government has signalled support for nuclear. The EPA predicted 180 new plants constructed by 2050 as a result of climate change legislation in its recent analysis (see: http://www.examiner.com/x-19285-Chicago-Economic-Policy-Examiner~y2009m10d26-EPA-sees-180-new-nuclear-power-plants-over-the-horizon ). Furthermore, there is evidence that the Obama Administration is backing nuclear expansion as part of a bid to get the required legislative support for passing carbon-constraining legislation. (see: http://www.washingtonpost.com/wp-dyn/content/article/2009/10/27/AR2009102704081.html )

Should we expand nuclear power? I believe that, if we want to slow the pace of and eventually reduce carbon output, nuclear will have to be part of the solution. When you consider the scale on which we use electricity, wind, solar,  geothermal, and conservation in their current state of development don’t do the job . Hopefully, one day we will be able to cost-effectively tap the power of the sun for most of our electricity needs and will be vastly more efficient in our use of power, but that day isn’t today and by the time it arrives we may have suffered a dire price. 

It is essential to  understand the differences between nuclear power and renewables in terms of scale. Nuclear plants are typically both rated higher in terms of the amount of electricity they generate, and have much higher capacity factors than renewable plants. The capacity factor is a percentage of the rated power that a unit actually produces over the course of a year. For nuclear, capacity factors tend to be above 90% on average, and can be 100% in years in which fuel is not changed out and there are no other disruptions. For wind, a reasonable capacity factor is about 33%. This means that a typically sized nuclear plant (1000 MW(e)) produces more than 4000  wind turbines of 600 KW (e) or almost the same as 500 massive 5 MW(e) wind turbines. (These are at conservative capacity factors of 85% for nuclear and 35% for wind.)

So what is the tough nut to crack if the legislative environment is suitable for nuclear power’s growth? If one asks what policies need to be put into effect to spur US nuclear renaissance, one might quickly note that said policies are largely already in place, and still the evidence of a resurgence is primarily on paper.

First, you would need to provide loan guarantees. Why? Because private utilities don’t typically have enough assets to get people to loan them billions of dollars over a relatively short timeframe. It is not that these firms are small or not profitable, but rather that the magnitude of costs and risks for nuclear is so high. This is exacerbated by the many examples of planned plants that have not panned out. Famously, the Shoreham Nuclear Power Plant in Long Island, New York was completed but never made a return on investment. The operator eventually went out of business / was subsumed by a government entity. The Energy Policy Act of 2005 provides for a program that would reimburse lenders up to a cap in case of default. Current discussions are considering increasing the $18.5 billion pot for this program as that, sadly, is a scant amount on the scale of spurring a massive increase in nuclear power.

Second, while the nuclear power industry has had a quite respectable safety record, the scale of possible consequences and liabilities makes it impossible for utilities to afford the kind of insurance they would need to ensure they could stay in business in the aftermath of an accident. The government has the utilities covered on that front as well with the Price-Anderson Act that caps the liability of private firms so that they only have to insure up to a certain level.

Third, a major problem in nuclear power plant construction, much as in Defense Department acquisitions, is a proclivity towards cost-overruns and delays. One can imagine that stretching out the interest payments on an $8 billion dollar loan could be quite costly proposition.

It is useful to understand that nuclear plants are cost-intensive in front-loaded construction costs, but are relatively cheap in terms of fuel and operations and maintainance. This means that, once plants are built, they are relatively profitable when the utilities no longer have to funnel a big chunk of the money back into paying off the capital costs. I’ve heard an employee from Georgia Power say that nuclear was by far their least expensive power source, but this was, of course, based on the fact that the plant costs had depreciated off their books. The Federal government has provided delay insurance to cover delays that are due to the regulatory requirements (i.e. if the NRC puts a hold on you, the government picks up the tab) for a limited number of early plants. Furthermore, some jurisdictions (i.e. Georgia and Florida) have approved the extremely controversial practice of allowing their utilities to charge customers for plants before they are even running (for that matter, before construction has even begun.)

Despite all these policies, I remain skeptical that we will see a major nuclear power plant construction boom given the magnitude of costs and risks involved. This puts me at a loss. While I believe in the benefits of nuclear power, I am also quite concerned about our massive deficit, so I’m not too sure about the one policy prescription that remains available to jump start a renaissance. That is, if the government buys or substantially increases subsidization of nuclear power that may make a difference. Any such policy would have to ensure that taxpayers got their investment back in terms of a cut of the earlier mentioned profitability.

In the Fall of 2002  I drafted an essay that became a Cato Institute Policy Analysis paper on why invading Iraq was a bad idea. In essence, the paper used rational actor theory to propose that there were better ways to address the threat to US security interests posed by Iraq, to the extent such threats existed, than by going to war. Now, seven years later, it is interesting to revisit the subject.

What made me think about this the recent discussion about a surge for Afghanistan. General McChrystal’s suggestion that 40,000 additional troops need to be introduced into the theatre raised quite a stir in the news. However, there seems to be a widespread opinion among military leaders that the 40,000 could not begin to be introduced until the new year, and could not fully be in place until late next year (presuming that they would all come from the US.) Perhaps President Obama’s delayed response is due to an attempt to figure out where they could get these troops in a reasonable timeframe. It is telling that despite a budget of over half a trillion dollars (not counting supplementals) and a military of over three million people when all branches and reserves are included, we cannot come up with 40,000 troops. Of course, few of the three million are relevant to the task at hand (i.e. sending F-16 mechanics or submariner firemen to Afghanistan is not that useful), but this raises a question for another day about why our military seems to be so ill-tailored to the wars it fights. However, the point to note here is that we can’t come up with 40,000 troops because many of the relevant troops are either in Iraq, already in Afghanistan, or are momentarily  rotated out of one of our two war zones long enough to keep their private lives in order and their sanity intact.

Let me acknowledge first that I, at least, was as fooled as anyone about the likelihood that Iraq had weapons of mass destruction (WMD) and /or programs for WMD. Readers of past posts will note that I place little stock in the ability to know or predict behavior absent first-hand knowledge. Despite the sound advice of Sun Tzu that we cannot know an enemy’s capabilities (much less their intentions) without first-hand information (e.g. through spies) and that such knowledge cannot be derived from oracles, humanity still thinks it can – except our oracles are probabilistic risk models. That said, in the absence of certain knowledge one is forced to make a best guess based on a reasonable reading of past actions and the available  indicators. I maintain that, given the uncertainty, it was not unreasonable to think that Iraq had WMD, and, at any rate, the advice given was optimal whether Iraq had WMD or not. The fact that Hussein did not have WMD by no means invalidates but rather bolsters the core message of the paper that (even believing that there were chemical weapons or worse) the threat to US security interests was overblown, and, to the extent these threats existed, they could be handled more effectively without force.

The question at hand here is whether we are better off having attacked Iraq, and I would maintain that we are certainly not at the moment. If, unlikely as it may be, we are threatened tomorrow by an actual threat to our existence or fundamental strategic interests we would be slow and hard-pressed to respond because we are stretched thin by the war in Iraq. True, there is one less dictator in the world. Nice as that may sound, as long as that dictator is not ruling the US, it is not a good measure of whether US interests are improved.

One issue to consider is the threat posed by the perception of the US as a “high capability – low will” state. I don’t suspect we have any enemies that think the capability of the US military is anything but extremely high. Our military is technologically without peer, and is, at best, matched by few in terms of the level of training and morale of forces (I would contend that an all-voluntary military is a force-multiplier unto itself, particularly after spending so much time studying the Russian system and its influence on combat-effectiveness when I was a graduate student .) However, there is also a perception that the US has a limited stomach for warfare, and will not see its engagements through to the end. This problem is created when a country is a little too fast-and-loose in going to war. Its danger is that it decreases the perception of other states of the cost of conflict with America and makes them more likely to engage in activities that may be viewed as threatening.

Frankly, I am astounded at the relatively slow erosion of support for conflicts in Iraq and Afghanistan that is, I presume, a mix of the influence of the 9-11 events on the national psyche and a detachment of the average American to these distant wars. The erosion is present none-the-less. It is not unreasonable that American support for the war in Iraq has diminished. The outcome of the conflict fundamentally affects the way people in Iraq live but not substantially how Americans live, and so it is a given that people over there will be willing to fight long after our will wanes. You may remember hearing a line during the political debates to the effect that ”Timelines to withdraw would be a boon to insurgents and radical elements”. I hate to break it to those critics, but whether we leave now, next year, or in 20 years, some radical element will be around to claim victory. 

The US needs to look at war more like it looks at nuclear war. In other words, it is an extreme action against dire attacks against the national existence or critical national interests and should not be engaged in lightly, and that, having made the decision, we will fully accept the consequences of war and see the conflict through to a definitive end. War as a means to reach limited objectives such as tweaking the world into a more palatable form – as I would suggest was the case in Iraq – is a dangerous game. 

Unfortunately, we are really only mid-course in the conflict in Iraq, so knowing the degree to which we will be better or worse off after than before the war remains unclear. If our government (both the Bush and Obama administrations) is correct in its prevailing presumption that we can leave an Iraq that is democratic, stable, and friendly to the US we may end up better off. However, we live in a world where uncertainty is inexorable, and there are other scenarios, that we cannot accurately judge the likelihood of, that may make us worse off. The most prominent of these alternative scenarios is that the Shia majority takes control and reciprocates against a minority that oppressed them for decades. Under this scenario, we will have essentially built an Iraq – Iran alliance that will make any involvement we have in the Persian Gulf region more challenging and may shake up regional stability.

I was disappointed to see that the Obama administration rejected a meeting with the Dalai Lama on his upcoming visit to Washington DC. This symbolic act of deference to the Chinese seems like an interesting follow up to slapping a massive 35 percent tariff on tires imported from China.

This shows just how politics results in bass-ackwards policy. While comparing the Chinese Tire Tariff to the Hawley Smoot Tariff Act may be hyperbole, it cannot be said to be sound economic policy by any stretch of the imagination. (Proponents of tariffs often forget that the US exports things as well, and life gets a lot harder for those US companies that export goods and services when tariffs are imposed. [Why shouldn't other countries return the favor.] So, in essence, you are hamstringing the companies that do things well relative to the rest of the world in support of those companies that are not competitive of their own faculties.) Of course, the tariff is not an economic policy in that it is not a plan of action designed to achieve an optimal effect on US national income. Instead, it is a political policy designed to increase / maintain support for a political party, and no doubt there was some sort of tit-for-tat agreement (presumably related to support for healthcare and / or carbon constraints) that played into the agreement.

On the other hand, because there are relatively few voters of Tibetan origin in the US, it is quite easy to use turning down a meeting with a the Tibetan religious leader as a means to buy good will with the Chinese. Of course, the Chinese may gladly accept the actual injury imposed by the tariff in exchange for the imagined victory of being able to point out that the US doesn’t recognize the Dalai Lama’s status. The Chinese often seem more concerned about what appears trivial and symbolic than real offenses. However, from the Communist Party of China’s perspective, the economic cost of a tire tariff may be inconsequential compared to the boon of realizing that they can do as they please domestically and regionally without suffering the slightest loss of legitimacy on the international stage.

Of course, as we in the United States have gleefully accepted a situation in which we gluttonously overspend while the Chinese willingly buy up our debt, we are not in a great position to say anything if the Chinese say… abscond with a little boy in order to usurp a religious lineage (particularly one which has relatively few adherents / voters in the US.) [This referring to the Panchen Lama, who disappeared and was replaced with a Party-sanctioned puppet. I, of course, don't know that he was killed, just that he has been kept out of the public eye and incommunicado.]   

 Needless to say, I think, in this particular case, the Obama Administration got it entirely wrong. The Administration should foster free trade, and not encourage China to believe that they can set the White House’s meeting agenda and /or replace religious leaders without loss of legitimacy. It was big news that Italy dropped in the most recent Freedom House rankings from “Free” to “Partially Free”, but no one would imagine that Italy could get away with saying: “Sorry Cardinals, we know you picked this ‘Benedict’ guy, but we’ve got this other guy- ‘Antonio’, and he’s now the real Pope. By the way, before you complain, Vatican City is no longer a sovereign country - we took it over as it was never really its own country anyway.”  There would be outrage, and people would stop treating Italy like a first world power.

Yesterday was a sad day for Highlander and Braveheart fans, as it will forever mark the day that Scotland went Nancy on us. Scotland has a long proud history of being a country of men’s men. Sure they wear the same skirts as Catholic schoolgirls, but they were able to carry it off because they had reason, by way of mastery of head-butts and telephone-pole throwing, to be secure in their national manhood.  

Now, having let a terrorist responsible for killing almost 300 people go free on a hardship release, the Scots have surpassed France’s valiant 12 minute defense of Paris in 1940 to take the prize for the All-time Fancy Cakes and Doilies Act of National Wussitude. Soon, once hyper-masculine names like Angus McLeod and Clyde Wardlaw will replace Jean Floubert and Remy Christian as the kind of names mothers give sons who they want to grow up to be top-ranked figure-skaters. Not to cast aspersions on moms, most of whom would probably respond to the argument that al-Megrahi was dying of cancer with a brusk: “He might have thought about that possibility before he vaporized 300 people.”

What’s next Scotland, might you let your pedophile inmates take recess at the local elementary school to ease their jangled nerves? Perhaps let everyone with an enlarged prostate go free? I hear there is a lot of that going around in prisons.

Data Source: Energy Information Administration: Short-Term Energy Outlook, August 2009

 The answer to the question posed by the title, of course, varies depending upon the nature of one’s yardstick. As one can see, renewables are minor players in US electricity generation when compared with coal, natural gas, and nuclear. Geothermal displays less than 0.8% of the output of coal, and the figures for solar and wind are 0.07% and - a whopping  – 2.4% respectively.

If the point of comparison is how much other countries generate by renewables in absolute terms, the US is certainly prominent, coming in behind only a few other large countries. Of course, this may lead one to note that the US is a collosal juggernaut in terms of both electricity consumption and generation, and the fact that countries like China, Canada, and, recently and presumbly based on its bio-fuel pursuits, Brazil are bigger lead one to wonder where the US falls in electricity generated by renewables as a percentage of total electricity generated. At about 9% of net electricity generation coming from renewables, the US is not near the top of countries using renewables, and for 2005 (the most recent year for which their is widespread data) the US came in about 117th out of 212 countries.

The US has been ramping up wind power as of late, and did recently surpass Germany as the world’s number one country for wind generation of electricity. However, it should be noted that the total net electricity generation by wind in the US in 2007 (when Germany still reigned supreme) was about equal to the output of four typical nuclear power plants (i.e. assuming 1,000MW(e) plants running at a modest 90% of capacity.)

Love it, hate it, or satire it hilariously (ala. Dr. Strangelove), it is hard to argue that there isn’t a satisfying elegance to the concept of Mutually Assured Destruction (MAD). By satisfying, I mean that there is a clearly defined logic that results in unambiguous policy prescriptions. If two countries each have the “absolute weapon” [i.e. weaponized thermonuclear warheads], and can retain the ability to blow the hell out of each other, they won’t go to war. It is as simple as that. It is true that the policy prescriptions often sound completely daft at worst or faintly fortune-cookie-esque at best, as in: “defending yourself increases your danger”, or “targeting cities is less belligerent than targeting missile silos.” 

If you take a positive view of MAD, and turn the words around to “increases your danger, defending yourself does”, it sounds sage – like something Yoda might say. However, for those opposed to MAD,  it sounds like the kind of thing you might hear a crazy homeless person mumble to themselves as they push their shopping cart down the street, just like “I get drunk to think clearly”, “I built this city from pudding and matchsticks”, or “buying up mortgage-back securities,…how could I lose?” However, the Zen koan-like quality of the policy prescriptions aside, it is a pleasant rarity to not have counter-veiling forces pulling policy in multiple directions. ”Cash for clunkers” results in a lot of energy and material being expended on vehicles that might not otherwise be built, and may result in people going through more vehicles than they otherwise would (i.e. the environmental laudableness of the program is not as patently clear as it first seems.)  Increasing minimum wages will, under most conditions, increase unemployment. Subsidizing farmers results in more grain production and depressed grain prices (exacerbating the condition that led to the policy in the first place.) In short, the realm of policy-making is rife with catch-22s, but MAD seems, ironically, straight forward.

 The challenge before us is to find an equally compelling logic of strategic stability in a world disarmed of nuclear weapons. It may require taking the most brilliant people in the country and shipping them off to someplace like Santa Monica for a few years (just like the formation of RAND after Word War II, whose eminent scholars were largely responsible for MAD), but I’m confident there is a way.

The magnitude of the United States’ Department of Defense (DoD) is, on many levels, awe-inspiring. This led me to create this little trivia game called “DoD or Country” that considers which is larger in various aspects - our defense complex or given countries. I hope you enjoy it. The anwers appear below. Don’t peak.

 Questions:  

1.) Weighing in at $583 billion US dollars, which is more expensive: the US DoD budget or the budget of the entire government of Australia?

2.) At 9,500 square kilometers, which is more extensive: America’s largest military installation -White Sands Missile Range – or the country of Cyprus?

3.) Consisting of about 3,600,000 people, which is larger: the combined active, reserve, and civilian components of the DoD or the population of Mongolia?

4.) At 440,000 barrels per day, who consumed more oil in 2006: the Department of Defense or the country of Argentina?

5.) Consisting of 45 ships, which is larger: the US Naval Fleet Auxillary Force (i.e. the ships that supply the Navy’s combat fleet) or the merchant marine fleet of Lithuania? 

6.) Consisting of 185 aircraft, which contains more aircraft:  the current C-17 cargo plane fleet of the US Air Force or the current Singapore Airline’s fleet (all models of aircraft combined)?

7.) At 764 dead, which involved a greater number of lost lives: the US military’s Killed in Action figure for 2007 or the number of fatalities due to terrorism (as defined by the US NCTC) in Somalia in the same year.

8.)At 2,150 Megawatts (electrical) [MW(e)], which has a higher combined output rating from all nuclear reactors: all of the active  aircraft carriers of the US Navy or all the commercial nuclear power plants in Brazil?

Answers:

1.) DoD; Australia’s annual budget in the same year (2008) was a mere $340 billion.

2.) Cyprus; White Sands is 8,300 square kilometers (1,2oo km. sq. less.)

3.) DoD; Mongolia’s population is only about 3.041 million.

4.) Argentina; The South American nation’s oil consumption was 120,000 barrels per day more.

5.) Lithuania; The Baltic state’s fleet consists of about five more merchant ships than the US Navy’s Auxillary force. (Perhaps a few more than that depending upon how you define “ship.”)

6.) DoD; The Air Force has almost 80 more C-17s (of all varients) than the Singapore Airline has in total aircraft (of all models.)

7.) DoD; The DoD reported 25 more killed in action in 2007 than was the number of Somali terrorism fatalities (739) that year.

8.) DoD; Brazil’s two reactors are rated at 2,007 MW(e), while the 10 Nimitz and one Enterprise class carriers have ratings of 194 MW(e) (both reactors on a Nimitz combined [times 10]) and 210 MW(e) (all eight Enterprise reactors combined).

Yesterday the New York Timesreported that the Obama administration had judged that there was a high likelihood that the North Korean freighter, Kang Nam, was probably just leading the US on a wild goose chase. In other words, that the rusty ship probably had no illicit cargo onboard, and was hoping that it could draw the US or one of America’s allies into the embarrasing position of searching the boat only to find no booty. (See: http://www.nytimes.com/2009/07/01/world/asia/01sanger.html?hp)

The US Navy has been tracking and monitoring the ship’s movements since it left North Korean waters, and it had earlier been speculated that the ship might contain a small arms shipment for Burma. The question has been whether UN Security Council Resolution 1874 that encourages states to board and search North Korean vessels suspected of violating the arms export embargo would be put to the test. The DPRK had said it would consider such a search a violation of its sovereignty, and an act of war.  (See: http://www.un.org/News/Press/docs/2009/sc9679.doc.htm)

The latest news seems to be that the Kang Nam has turned around, and, for the moment, is headed back in the direction of North Korea. (See: http://www.chicagotribune.com/news/nationworld/chi-tc-nw-briefs-0630-07014jul01,0,3444662.story)

There has been speculation about the rationale for making such a jaunt, but it seems to be a quite beneficial test for the DPRK. I think the little vessel’s voyage is disconcerting. If North Korea wants to ship missiles in order to earn some funds, one of the few ways it is able to, then it would not send those missiles out on the first voyage. Rather, conducting a test is a win – win for the Kim’s. If they don’t get searched, they gain confidence that they won’t be searched in the future – as long as the level of intelligence remains the same. If they had been boarded, they would have also made it hard for the US to repeat the venture in the future without a much higher standard of intelligence. It is true that they would have had to deal with the fact that they had said such a search would be an act of war, but since the Korean War is not legally over, the Kim’s could worm their way out of that threat at low-cost manner.  The question of the day is what happens if the next time the Kang Nam goes out (or the third time or the sixth time) it does have missiles on it. We can’t count on having better information, so at best there is the lucky guess possibility. For those who want to dismiss the Kim dynasty leaders as irrational and incompetent (and I, myself, have certainly had trouble accounting for some behaviors with motives other than childishness or narcissism), consider the masterstroke of this gambit.