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The Truth
The truth is as hard to grasp as water in your hand. – Justin Bass, copyright June 5, 2015.
Google search for “water EPA” on June 5, 2015
WARNING: Cancer in the Water
Carcinogens in oil-drilling wastewater pose a threat to California’s drinking water. That is why on July 1, 2015, the State Water Resources Control Board will craft its first groundwater-protection program. The final criteria will be based partly on input from the public in May and June. Unfortunately, the Water Board has no plan for a public-awareness campaign to let the people know about the public-comment period, other than the Water Board’s website.
Anyone can make suggestions to the Board’s headquarters in Sacramento by email, fax, standard mail or in person, until May 29. Then the Lawrence Livermore National Laboratory will make its recommendations available to the public on June 16. Public comment on the final draft of the groundwater model criteria will be open until June 29. If all goes according to schedule, the Board will finalize the groundwater plan July 1 and adopt it officially on July 7.
In contrast to New York’s moratorium on hydraulic fracturing (“fracking”), California decided to regulate all methods of well stimulation used by the oil companies. California is not only the 7th largest economy on the planet, it is also the 3rd largest oil-producing state in the country.
The black dots represent California’s active oil wells regulated by the state’s Department of Conservation (map procured from http://maps.conservation.ca.gov/doggr/index.html#close):
This is the first time in the history of the state that California will regulate enhanced methods of oil extraction used by oil companies, since oil drilling started in the Golden State over 120 years ago. Long, metal straws, as oil-drilling pipes, pierce the groundwater on the way to the pools of fossil fuels thousands of feet below the surface. Any leak in the oil-drilling pipe could contaminate the groundwater. The oil companies also use injection wells to dispose of wastewater. Likewise, the injection wells stick through the groundwater, and any hole in the injection wells could pollute the groundwater.
California does not even know how much groundwater it has because nobody has ever bothered to measure and track it. The U.S. Environmental Protection Agency allowed oil companies to dump waste into certain areas of California’s groundwater because it was thought that the water was so deep and dirty it would never need to be used. Farmers who typically drilled to a depth of 500 feet to access drinking water now have to drill past 1,000 feet to reach the potable groundwater. Corporations, like Crystal Geyser, Coca-Cola and Nestlé, also drill for California’s groundwater to make as much bottled water as they want, and they do so legally because the state currently allows property owners to access the water under the land they own. Some parts of the state are sinking, or subsiding, because taking water out of the sediment is similar to letting air out of a tire.
Now in the fourth year of a debilitating drought, Governor Jerry Brown and the Water Board enacted a 25 percent reduction in urban water use. California farmers, who grow the overwhelming majority of fruits, nuts and vegetables for the rest of the country, have also agreed to a 25 percent reduction in water use. On top of that, the Metropolitan Water District, which supplies drinking water for most of the 22 million people living in Southern California, announced a 15 percent reduction in imported water from the Colorado River and Northern California. The panoply of water-rationing programs will go into effect on July 1.
There is less water to go around for California’s 38 million people and to grow the fresh produce shared with America’s 300 million-plus thirsty and hungry mouths. Yet oil companies continue to use well-stimulation techniques that could contaminate drinking and irrigation water. The state’s oil regulators admitted that oil companies have been illegally dumping drilling waste into underground sources of drinking water that were not exempted by the EPA. Recently 23 of the offending injection wells were shut down.
The U.S. Clean Water Act protects surface waters, such as lakes and rivers, from which California draws about 25 percent of its potable water. The U.S. Safe Drinking Water Act protects the other 75 percent of the Golden State’s drinkable water, which comes in the form of groundwater. There is one exception to the SDWA: the Republican-majority Congress of 2005 exempted fracking fluids from federal regulation, thus leaving it up to the states to regulate fracking contamination of groundwater. Now California’s oil regulators are investigating all 50,000 injection wells in California, and they suspect approximately 2,500 injection wells may be operating in violation of the SDWA.
In addition, President Barack Obama will announce a new rule to protect all United States drinking water, surface water and groundwater, The New York Times reported on May 22, 2015.
“There are enough chemicals in oils that are carcinogens,” but when acid-mixes are used to stimulate the oil well and then injection wells shoot the hazardous materials underground “that’s even worse. That creates all the chlorinated hydrocarbons, which are all carcinogens. Like chloroform, that’s a carbonate. All the PCBs, all the polychlorinated biphenyls, are even more toxic,” said Dr. Robert Schiestl, who is a professor of Pathology, Environmental Health Science and Radiation Oncology at the University of California, Los Angeles, as well as a member of the University’s Jonsson Comprehensive Cancer Center. “Epidemiological studies lag behind 40 years because that’s how long it takes for the people to get cancer.”
Many times health professionals, like those at the Children’s Hospital Los Angeles for example, treat the symptoms of leukemia without anyone ever asking what caused the leukemia in the first place. A mother, who for many years has lived on the same block as a residential oil-drilling site in the City of LA, gave birth to a child with leukemia, her neighbor said. The baby died and the mother does not want to talk about it for public consumption, according to the neighbor, who did not want to be named. When asked if a woman could give birth to a child with leukemia as a result of drinking water with oil-drilling contaminants in it, Dr. Schiestl answered, “It is possible.”
Since January 1, 2014, oil companies operating in California are required by the law, known as Senate Bill 4, to inform neighbors of any well stimulation within 1,500 feet (or the length of five football fields), so that the neighbors can request tests of the local groundwater. The oil companies and their state regulators keep changing the definition of well stimulation. Therefore, the public is not notified and never knows its rights. Likewise, California’s first groundwater-monitoring program is supposed to be open for public comment, starting with a public workshop in Sacramento on May 19. Again, the majority of the public did not know about Tuesday’s open event and most people do not know about the problem of oil companies contaminating the public groundwater.
In March, Governor Brown staged a photo-op in front of a desiccated, Sierra Nevada mountainside, where there is historically a visible covering of white snow for scientists to measure. April storms provided enough snow for popular winter resorts in Mammoth Mountain and Tahoe to extend their ski seasons, but 2015 was the driest winter in California since the state started recordkeeping of droughts in the 1800s. California needs snow more than rain, because snow melts slowly and accumulates in underground aquifers whereas rain runs off into the gutters and out to the ocean before state and local agencies can collect it for drinking. Not only does the oil industry contaminate groundwater with its use of injection wells dumping into pristine aquifers, but the burning of oil creates warmer precipitation events and thus depletes California’s essential snowpack. The snowpack is the state’s slow-drip supply of drinking water. Snow we can hold in our hands, rain runs through our fingers.
Despite having a law to protect drinking water from oil-drilling contamination, the enforcement of the law is still up to the oil regulators at the Division of Oil, Gas and Geothermal Resources (under the aegis of the Department of Conservation), who are operating in the best interest of the oil companies’ profits and the $6 billion worth of annual taxes they produce for the state, rather than informing the public of potential well-stimulation contaminants in the groundwater, beneath their homes and near the oil drilling sites.
The $6 billion tax figure comes from a December 24, 2013 Op-Ed published in the Los Angeles Times by Catherine Reheis-Boyd, the president of the Western States Petroleum Association. The WSPA lobbies for the oil industry in California and five other states. When the LA City Council voted to ban hydraulic fracturing within the city limits in 2014, the oil companies and their lobbyists threatened to sue the City. So there is no ban on hydraulic fracturing in the City of LA.
To date, California has conducted only one SB 4-related, water-quality test, and that test was for surface water not groundwater, according to Andrew DiLuccia, Public Information Officer at California’s Water Board. “The test results indicated no impacts associated with well stimulation,” he said about the lone water test near Fillmore, in Ventura County, California. None of the underground sources of drinking water polluted by the oil companies’ 23 illegal injection wells have been tested under SB 4 regulations. However, benzene, a known human carcinogen, was detected inside fracking wastewater at “levels thousands of times greater than state and federal agencies consider safe” in 2013, according to an article from the Pulitzer-Prize winning reporter, Julie Cart, of the Los Angeles Times.
“Benzene is the most toxic of the fuel components and can seriously affect the blood cells. Industrial workers exposed to high levels of benzene in the air were at higher risk of developing a type of anemia and of having a low white blood cell count than other unexposed workers,” reads a July 1997 report from the New Jersey Department of Health and Senior Services, titled Volatile Organic Compounds in Drinking Water. “Leukemia, a form of cancer of the white blood cells, was more likely to occur in industrial workers as compared to other workers. There is also limited evidence that benzene can injure the fetus or cause miscarriage.”
Statewide water rationing goes into effect this summer for all Californians, while the oil companies continue to use known carcinogens and stimulate oil wells with thousands of gallons of hydrochloric acid mixed with thousands of gallons of water. For instance, Breitburn Energy and Pacific Coast Energy operate dozens of active oil wells, called West Pico, at the corner of Pico Boulevard and Doheny Drive in the City of Los Angeles. The City is host to hundreds of active oil wells, many of which are in residential neighborhoods, where people in cars navigate the streets and pedestrians walk in the shade of tree-lined sidewalks.
The black dots represent the City of LA’s active oil wells:
The Department of Conservation’s public records show that on January 2, 2014, DOGGR’s engineer, John Huff, approved the West Pico 12 oil well to begin “stimulation of the Hauser Formation & new Repetto perforations with 15% HCl [Hydrochloric Acid],” in the Beverly Hills-adjacent neighborhood represented by LA City Councilmember, Paul Koretz. (Hauser and Repetto are millions-of-years-old geological formations.) This use of acid to stimulate the oil well is considered “maintenance” by the oil regulators, but it still creates wastewater that the oil company injects deep into the ground, in the same neighborhood as moms pushing baby strollers and dads pitching to bat-wielding kids in the front yards.
“DOGGR does not do an adequate job of regulation,” Koretz said.
Many of the local residents have no idea about the toxic chemicals being used down the block. “If we had known about the oil drilling, we never would’ve moved here,” said Lyndsey Vlaicu, who lives with her husband and their 2-year-old son within a stone’s throw of Pacific Coast Energy’s West Pico oil derrick, which is disguised behind a building-like façade and a fringe of trees. “I can smell gas four to five times a week.” Acrid fumes pervade the air more so when the workers show up with their trucks, Vlaicu added.
Full disclosure: I used to live on the same block as the West Pico oil wells, but moved away in March 2015. I did not know Mrs. Vlaicu until after I moved from the neighborhood and began reporting this story. Like many of the residents on the block, I was not notified about the productive oil derrick, which is located about the length of one football field away from my former apartment.
The black dots represent the active West Pico oil wells:
In practice, the regulators at DOGGR determine what constitutes well stimulation, no matter what the text of SB 4 states. There is no agency other than DOGGR to enforce the law and there is no recourse for the people of California to challenge DOGGR’s authority. The EPA gave California “primacy” to regulate its oil drilling and groundwater, which the state ostensibly fulfills through DOGGR and the law, SB 4. The oil companies’ lobbyists helped to write the law and their regulators assist the oil companies to get around the required public disclosure of well stimulation.
“This is the well that we want to perforate the Repetto and do an acid job,” wrote Frank Smith of Breitburn Energy to Huff, the oil regulator at DOGGR, on January 27, 2014. “We believe that there is adequate protection of any USDW [Underground Source of Drinking Water]. Tom [McCollum of Pacific Coast Energy] and I would like to call you around 9:15 am this morning to discuss with you. Our West Pico rig is awaiting orders and not having to do a cement squeeze would save us about $100,000.”
Breitburn got the approval for Pacific Coast Energy to go ahead with the acid job.
“To follow up on our phone conversation, based on the results of the cement bond log, no cement squeeze is necessary at this time,” wrote Huff, the oil regulator.
A cement bond log calculates the thickness and quality of the cement around the oil pipe.
Not only would it have added to the cost, but the cement squeeze at West Pico 12 would have also added an extra layer of protection between the groundwater and the toxic chemicals in the oil/acid mix running through the industrial piping. For a reference point, the inadequate cement job and the overdue cement bond log at the Deepwater Horizon oil drill in the Gulf of Mexico were largely to blame for the catastrophic ocean spill in 2010.
The cause of the massive oil spill in the California ocean water near Santa Barbara on May 19 is still unknown, as of this reporting.
It is important to note that solar-electric panels and plug-in cars never polluted the water in California. It’s time for all of us, as a civilization, to transition from using oil and other fossil fuels as soon as possible. We, the consumers, are causing our own problems by perpetuating the production and sale of dirty fossil fuels because almost all of us continue to use them in one way or another. We use oil and gas for our cars and we cook with natural gas flames. We heat our water with fire and we produce our electricity by burning fossils fuels. However, our cars, our cooking, our heated water and our electricity can all be energized by the Sun. If you want to point a finger at anyone for the problem of global warming, the prolonged drought and the scarcity of clean water in California, power down your computer or phone, extend your index finger toward the black screen and take a good, hard look at your reflection. What are you going to do? You can no longer plead ignorance. Now you know the problems and the solutions. So what are you going to do?
Here is the Water Board’s website:
http://www.waterboards.ca.gov/water_issues/programs/groundwater/sb4/docs/notice_model_criteria.pdf
For Perspective:
Go to page 4 of the highlighted document below to see “well stimulation” at the West Pico 40 oil well, as the South Coast Air Quality Management District, or AQMD, defines it:
COM – R1148.2 Chemical Report – PB – 11-5-2013 – Event ID#868 – Fac ID; …-3
After receiving a public records request in April 2015, the AQMD, has delayed the release of 2014 and 2015 chemical reports at the West Pico facility, due to possible trade secrets, said Lisa Ramos, Public Records Coordinator at AQMD. SB 4 protects trade secrets as long as the oil company reports the chemicals to DOGGR and defines the use of them as “well stimulation.”
Neither Breitburn Energy executives nor Pacific Coast Energy executives returned calls and emails requesting a comment about their residential oil drilling and “well stimulation” that runs through neighborhood groundwater.
Read the public document cited in this article for yourself:
West Pico 12 – Well Stimulation in 2014 – 03720146_DATA_2015-04-28
After many attempts to interview the oil regulators in California, the Assistant Chief Counsel for the Department of Conservation, Justin Turner, replied via email, “The Department does not make field inspectors available to the press for interviews, as a rule. An exception will not be made in this case.”
Multiple requests for an interview with Governor Jerry Brown went unanswered, including a hard-copy request mailed in an envelope to his office in Sacramento, as is the policy of his office. For the past two weeks, Governor Brown’s phone number responds with an answering machine stating that nobody can take a call and to try again later.
After more than a month of requesting an interview with Lt. Governor Gavin Newsom, his Communications Director and Senior Advisor, Rhys Williams, emailed back, “At this time, we’re unable to accommodate your request.”
* I submitted many different versions of this article to Los Angeles Times, LA Weekly, The Orange County Register, The New York Times, The Atlantic, Rolling Stone, National Public Radio stations 89.3 KPCC and 89.9 KCRW, as well as to local and national television news stations and many other news outlets. None of them decided to publish the article, so I am publishing it here because the information in this article is in the public interest.
Justin Bass is a freelance reporter and environmental advocate living in Los Angeles. He has a Master’s degree in Journalism from Columbia University and previously reported on the financial markets in New York. He has worked for both SolarCity and Tesla Motors.
For lagniappe…
“Head of California agency accused of favoring oil industry quits“
http://www.latimes.com/local/lanow/la-me-head-of-oil-regulating-agency-quits-20150605-story.html
“Get more out of your solar power system by using water as a battery”
Fande = Fact & Evidence; Cande = Conjecture & Exaggeration
Bring your Fande, leave your Cande!
It’s time to break up the big banks
[Now that the banks are healthy again] “let’s break these suckers up…so we can actually have justice for all, including bankers.” Go to minute 1:00 of the Daily Show interview to hear Neil Barofsky speak the words inside quotation marks.
[* My idea in brackets]
The $700 billion TARP (Troubled Asset Relief Program) bailed out Citigroup, Goldman Sachs, JPMorgan, and on and on. President George W. Bush and ex-Goldman Sachs CEO turned U.S. Secretary of the Treasury, Hank Paulson, said TARP would be used to buy up bad mortgages and help underwater homeowners in order to clear the “toxic assets” from the real estate industry and free up consumer credit again. Nope, didn’t happen that way. That’s why you always have to remember: Republicans and Conservatives will lie, cheat and steal.
source: http://www.nytimes.com/2010/12/02/business/economy/02fed.html
EXCERPT:
“At home, from March 2008 to May 2009, the Fed extended a cumulative total of nearly $9 trillion in short-term loans to 18 financial institutions under a credit program….
Even bedrock corporations like Caterpillar, Harley-Davidson, General Electric, McDonald’s, Toyota and Verizon relied on a Fed program that supported the market for commercial paper….
So did the California Public Employees Retirement System, the nation’s largest public pension fund, and several insurers and university endowments.”
Read more:
http://www.nytimes.com/packages/html/national/200904_CREDITCRISIS/recipients.html
http://www.guardian.co.uk/business/2009/oct/15/goldman-sachs-record-bonus-pot
Picture source: http://www.amazon.com/Bailout-ebook/dp/B00818J57W
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Open Letter to President Obama
Mr. President,
No Mary Jo White.
Your Fellow American,
Justin Bass
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Read more:
http://management.fortune.cnn.com/2013/01/30/mary-jo-white-sec-obama/
Everything Under the Sun by Justin Bass
* I highly recommend the book. I wrote it.
Glenn Hubbard should resign as Dean of Columbia Business School
“During a stint as chairman of the Council of Economic Advisers for President George W. Bush, from 2001 to 2003, Mr. Hubbard was known as the principal architect of the Bush tax cuts.”
source: http://www.nytimes.com/2012/10/14/business/glenn-hubbard-is-romneys-go-to-economist.html?pagewanted=all&_r=0
The Bush Tax Cuts were a disaster for our country. We lost more than $1 Trillion in revenue due to the Bush Tax Cuts. We could have used that money for our schools, hospitals, roads, bridges, and on and on. The Bush Tax Cuts mainly benefited the SuperWealthy, while the Average American’s wealth decreased during the Bush presidency. The architect of the Bush Tax Cuts – Glenn Hubbard – should not be teaching economics or supervising any business school as its dean. Worse yet, Glenn Hubbard advocates doubling down on “Trickle-down.” Glenn Hubbard wants more tax cuts that mainly benefit the SuperWealthy. We tried “Trickle-down” once, during Reagan’s term, twice, during George W. Bush’s term, and that’s it! No more! You can’t pull the wool over my eyes three times. Glenn Hubbard should resign as Dean of Columbia Business School. If he does not, the study of economics in America is a shameless exploitation of the majority of Americans for the benefit of the top 1-2% income earners. Glenn Hubbard helped cause the dire deficits we face as a country. He should be ashamed. But instead he is Dean of Columbia Business School and adviser to Mitt Romney – a man who is the epitome of the self-serving, tax-evading, lying, cheating, stealing, ship U.S. jobs to China and make millions of dollars of profit by ruining productive workers’ lives SuperRich.
You can call Glenn Hubbard “The Master of Disaster.” He did it with the Bush Tax Cuts in 2001 and 2003, and Glenn “The Master of Disaster” Hubbard wants to do it again with Romney. Don’t let him.
Vote for Barack Obama and the Democrats across the board in 2012, because President Obama and the Democrats work to benefit the majority of Americans.
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End This Depression Now! by Paul Krugman
EXCERPT from End This Depression Now! by Paul Krugman, pages 64-66; W.W. Norton & Company 2012:
“The Big Lie
I hear your complaints. Some of them are totally unfounded. It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp. Now, I’m not saying I’m sure that was terrible policy, because a lot of those people who got homes still have them and they wouldn’t have gotten them without that.
But they were the ones who pushed Fannie and Freddie to make a bunch of loans that were imprudent, if you will. They were the ones that pushed the banks because it’s one target, it’s easy to blame them and Congress certainly isn’t going to blame themselves. At the same time, Congress is trying to pressure banks to loosen their lending standards to make more loans. This is exactly the same speech they criticized them for.
–Michael Bloomberg, mayor of New York, on the Occupy Wall Street protests
The story I have just told about complacency and deregulation is, in fact, what happened in the run-up to the crisis. But you may have heard a different story—the one told by Michael Bloomberg in the quotation above. According to this story, debt growth was caused by liberal do-gooders and government agencies, which forced banks to lend to minority homebuyers and subsidized dubious mortgages. This alternative story, which says that it’s all the government’s fault, is dogma on the right. From the point of view of most, indeed virtually all, Republicans, it’s an unquestioned truth.
It isn’t true, of course. The fund manager and blogger Barry Ritholtz, who isn’t especially political but has a keen eye for flimflam, calls it the Big Lie of the financial crisis.
How do we know that the Big Lie is, in fact, not true? There are two main kinds of evidence.
First, any explanation that blames the U.S. Congress, with its supposed desire to see low-income families own homes, for the explosion of credit must confront the awkward fact that the credit boom and the housing bubble were very widespread, including many markets and assets that had nothing to do with low-income borrowers. There were housing bubbles and credit booms in Europe; there was a price surge, followed by defaults and losses after the bubble popped, in commercial real estate; within the United States, the biggest booms and busts weren’t in inner-city areas but rather in suburbs and exurbs.
Second, the great bulk of risky lending was undertaken by private lenders—and loosely regulated private lenders, at that. In particular, subprime loans—mortgage loans to borrowers who didn’t qualify according to normal prudential standards—were overwhelmingly made by private firms that were neither covered by the Community Reinvestment Act, which was supposed to encourage loans to members of minority groups, nor supervised by Fannie Mae and Freddie Mac, the government-sponsored agencies charged with encouraging home lending. In fact, during most of the housing bubble Fannie and Freddie were rapidly losing market share, because private lenders would take on borrowers the government-sponsored agencies wouldn’t. Freddie Mac did start buying subprime mortgages from loan originators late in the game, but it was clearly a follower, not a leader.
In an attempt to refute this latter point, analysts at right-wing think tanks—notably Edward Pinto at the American Enterprise Institute—have produced data showing Fannie and Freddie underwriting a lot of ‘subprime and other high risk’ mortgages, lumping loans to borrowers without stellar credit scores in with loans to borrowers who failed strict lending criteria in other ways. This leads readers who don’t know better to think that Fannie and Freddie were actually deeply involved in promoting subprime lending. But they weren’t, and the ‘other high risk’ stuff turns out, on examination, to have been not especially high-risk, with default rates far below those on subprime loans.
I could go on, but you get the point. The attempt to blame government for the financial crisis falls apart in the face of even a cursory look at the facts, and the attempts to get around those facts smack of deliberate deception. This raises a question: why do conservatives want so badly to believe, and to get other people to believe, that the government did it?
The immediate answer is obvious: to believe anything else would be to admit that your political movement has been on the wrong track for decades. Modern conservatism is dedicated to the proposition that unfettered markets and the unrestricted pursuit of profit and personal gain are the keys to prosperity—and that the much-expanded role of government that emerged from the Great Depression did nothing but harm. Yet what we actually see is a story in which conservatives gained power, set about dismantling many of those Depression-era protections—and the economy plunged into a second depression, not as bad as the first, but bad enough. Conservatives badly need to explain this awkward history away, to tell a story that makes government, not lack of government, the villain.
But this in a way only pushes the question back a step. How did conservative ideology, the belief that government is always the problem, never the solution, come to have such a firm grip on our political discourse? That’s a slightly harder question to answer than you might think.”
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* I highly recommend the book by Paul Krugman, “Winner of the Nobel Prize in Economics.”
picture source: http://www.amazon.com/End-This-Depression-Paul-Krugman/dp/0393088774
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For lagniappe:
Minute 9:23…
Read more:
“Hell is empty, and all the devils are here.”–Shakespeare, The Tempest
Transcription of Paul Krugman on CNBC’s Squawk Box, July 11, 2012
Paul Krugman on CNBC’s Squawk Box, July 11, 2012
Transcription
Andrew Ross Sorkin: “Today we are inducting a Nobel laureate into the Squawk Box Book Club. We are proud to present a Blue Chip award. I think this compares with the Nobel. I don’t know how you think about this?”
Michelle Caruso-Cabrera: “Way better.”
Andrew Ross Sorkin: “The book: ‘End This Depression Now.’ Paul Krugman walks us through the Financial Crisis that triggered the greatest downturn since the Great Depression, and offers us ways to move forward. Paul Krugman joins us on set this morning. Of course, he’s also the author of ‘End This Depression Now’ and ‘The Return of Depression Economics’ and ‘The Great Unraveling.’ And we have your award (Nobel prize for economics). How does this compare? Do you remember the morning that you found out you got the Nobel, and then you got this (the actual award)?”
Paul Krugman: “Can you do a Swedish accent? I think it would be a little bit more impressive.”
Andrew Ross Sorkin: “Is it a woman who calls? Or how does it happen?”
Paul Krugman: “It was some guy with an obviously fake Swedish accent. I didn’t actually believe it until it was up on their website about a half an hour later.”
Andrew Ross Sorkin: “So Paul, I want to talk about economics, and I want to talk about what’s going on in the world. But tomorrow we have Simpson and Bowles. Erskine Bowles, Alan Simpson on the show. And from everything that I’ve read and seen that you’ve said before, you’re not a fan of this. And historically, I will tell you, we get a lot of people who sit around this table and say ‘We’ve got to find a compromise in Washington [D.C.]. This is a good model. At least it’s a starting point.’”
Paul Krugman: “It’s a model that’s heavily tilted toward things that are not good ideas. It’s heavily tilted toward inflicting pain on the most vulnerable. It is obsessed with cutting tax rates. I mean, it’s not unlike the Republican side of it. It isn’t really a balanced proposal. It’s actually a proposal that’s very heavily tilted toward spending cuts, not enough toward revenue increases. I guess we could do worse, and, given the way politics are going, we might.
This is not a well-crafted proposal. And by the way, there are huge magic asterisks. If you think that they’ve actually solved the problem, it turns out that all of the big savings in Simpson-Bowles are all ‘Savings to be determined later.’ They don’t actually lay out how they’re going to control health care costs. And it is fundamentally about health care costs. And that does not become clear, the way they present it.”
Michelle Caruso-Cabrera: “Medicare, in particular.”
Paul Krugman: “Well, but Medicare is part of a broader problem, right? Medicare costs have actually grown a little more slowly than private insurance costs over the years.”
Michelle Caruso-Cabrera: “I’m talking about the federal government right now has Medicare, right? And Medicaid to some degree.”
Paul Krugman: “That’s right. But Medicare. If we could suddenly have French health care costs instead of American health care costs, our budget problems would be solved forever, right? It is about the very high cost of the U.S. health care system. And you cannot resolve our budget problem without resolving that. If you do resolve that, then this thing becomes a whole lot easier.”
Joe Kernen: “Paul, I was excited when you were coming in, because I view you as almost a unicorn. You really exist in real life. Sort of an ancient species or a new species. Because I try to understand where you’re coming from on some of this stuff. And I’m confounded when I read your pieces. And I’m hoping we can have a philosophical discussion.”
Paul Krugman: “Look, can I say something? We came into this [Financial] Crisis, and that’s what my book is about. Back then there were some very different views about how this thing was going to work, about how things were going to play out. People like me had one set of views. Other people had very different views. There were some predictions. A lot of people thought people like me were crazy…”
Joe Kernen (interrupting): Right.
Paul Krugman (continued through interruption): [Other people thought] we can have budget deficits without raising interest rates.”
Joe Kernen (interrupting): “But, but bigger picture Capitalism versus a Social Democracy model. And I was going to just ask you, there was a time when we had 8% of government as GDP [Gross Domestic Product]. Then we got up to 15%. Now we’re at 25%, and it will be at 40 or 50% eventually with entitlements, if they’re not reined in. Is there a maximum amount of government spending as a percentage of GDP below 100 that you would? What would it be? Is 25% ok for a percentage of GDP?”
Paul Krugman: “When I’m in Europe, I will actually lecture them. They should let their stores open on Sunday. They have too much regulation. But we have European economics. Look at Sweden, which has been sailing through this [Financial] Crisis beautifully. It’s close to 50% GDP.”
Joe Kernen (interrupting): “But, but, but there’s more people in Newark [New Jersey].
Paul Krugman: “Come on. It’s not clear what difference. It is possible…”
Joe Kernen (interrupting): “Would you put up the economic record of any part of Europe with the way we do Capitalism her over the last 200 years? Which one?”
Paul Krugman: “Oh, sure. Sweden again. Sweden was a poorer country than we were 200 years ago. If you’re looking for the last 30-40 years, you know Europeans don’t actually look that bad. They’re now screwing up because they made this terrible mistake of one currency without one government. But as of 2007, before this [Financial] Crisis hit, the previous 10 years had looked pretty good compared to ours, in a lot of dimensions.”
Joe Kernen: “You are a capitalist?”
Paul Krugman: “Yeah.”
Joe Kernen: “Is there some kind of modification to Capitalism? What would I call it?”
Paul Krugman: “I’m a Free Market Welfare State guy.”
Joe Kernen: “Wait a minute. A Free Market Welfare State.”
Paul Krugman: “I believe you let markets mostly run themselves. You have an economy that’s basically driven by market forces. But you collect taxes to provide a safety net. A pretty strong safety net.”
Andrew Ross Sorkin: “How big does the safety net have to be?”
Joe Kernen: “It goes back to our forefathers, who said ‘Limited government, low taxes.’”
Paul Krugman: “Really? I don’t actually remember hearing about that?”
Joe Kernen: “Nothing about that? Nobody?”
Paul Krugman: “No, I don’t think that’s in there [Constitution of the United States].”
* Mr. Kernen immediately grabbed the computer mouse in front of him and looked at his computer screen.
Michelle Caruso-Cabrera: “Let’s talk safety net. So Medicare, by the nature when you look at actuary tables, actually becomes a benefit for the rich. Medicare is for everyone. We have billionaires who sit on this set, and they get Medicare. And if you are poor, the actuary tables bear out that you will die likely before you ever get your first Social Security check or Medicare. So how big is the Welfare State?”
Paul Krugman: “That’s actually, that’s not actually right, by the way. It’s certainly not true. What matters is life expectancy at age 65, and that is higher for more affluent people. But think about how many billionaires are there? The amount of money you can save by means-testing Medicare turns out to be trivial. And, by the way, if you do means-test it, what you have done is increased marginal tax rates because you’ve said if you make more money then you will lose your Medicare benefit. That’s actually reducing incentives.”
Andrew Ross Sorkin: “I’m going to turn it around then. Is it trivial? I don’t actually believe this, but I’m doing this almost as a Devil’s Advocate. Is it trivial then to increase taxes on the wealthy, since the amount of money you gain in the same way?”
Paul Krugman: “No, that’s not true.”
Michelle Caruso-Cabrera: “The converse is not true?”
Paul Krugman: “No, the converse is not true. The amount of Medicare that we spend on the richest .01% of the population is a tiny amount of money. The amount of money we can gain in taxes is not a tiny amount of money, because they are very, very rich. The health care of a rich person doesn’t cost a lot more. Actually, it costs a little bit less than the health care of a poor person. The income of a rich person is higher, by definition. So there’s a lot more taxes.
So this is not true. We cannot solve our budget problems entirely by raising taxes on the rich. But we can make a significant dent by raising taxes on the rich. And we actually cannot make a significant dent by doing things like means-testing Medicare.”
Andrew Ross Sorkin: “You talk a lot about the bond vigilantes. And I’m curious, how much do you think we can spend to quote-unquote grow the economy, if you think that would work, before the bond vigilantes have a problem?”
Paul Krugman: “Well, first of all. I guess the question is. We have to look at history. There’s no easy way to do this by looking at spreadsheets. We look at the fact that Great Britain had debt levels as a share of GDP [Gross Domestic Product] much higher than we currently have, for most of the 20th century. Never a problem. We look at Japan, which people have been predicting bond vigilantes will attack for 20 years now. No problem. So it looks as if countries that have their own currency, that are stable, advanced democracies have the ability to run to levels.
You know, I don’t like, I don’t want us to get up to a Japanese level of debt. But there is no sign that we’re anywhere close. There’s no sign that we’re close to [???] points of GDP debt levels.”
Joe Kernen (interrupting): “People use the analogy: ‘When you jump off a building, you think you’re flying until you hit the ground.’ People say if we doubled to 4% on what we need to pay to fund our expenses that we’re already headed for Europe.”
Paul Krugman: “That’s. Even. You know. Think about Europe for a second. Think about the fact that Britain has levels of debt that are basically the same as ours. And are actually a bit higher than that of Spain. Britain (the Pound) is a safe-haven currency. They can borrow at pretty much the same rates we can. Spain is obviously in the news today. It’s not actually about the debt level. It’s about the constraints of that terrible mistake of a single currency created. It’s not about the debt level.”
Joe Kernen: “But, but there would come a time where it would be hard to get Chinese.”
Paul Krugman: “When the economy is doing well, you should be paying down debt. And I spent a large part of the last decade screaming about Bush and his tax cuts and his unfunded wars, saying that this is not what we should be doing. We should be trying to get our debt down.”
Joe Kernen (interrupting): “But.”
Paul Krugman: “But now is a time when we have an economic emergency where there really is no good alternative. If we try to balance the budget under these circumstances, all we do is throw ourselves into a deeper Depression.”
Joe Kernen: “What would be a number? What’s the maximum amount that the government should spend as a percentage of GDP [Gross Domestic Product]? Do you have a number for me? I’m just trying to figure it out.”
Paul Krugman: “Well.”
Joe Kernen (interrupting): “Well, I’m trying to figure it out. You know [hand gestures from Mr. Kernen].”
Paul Krugman: “Look, when it gets above 50.”
Joe Kernen: “When it gets above 50.”
Paul Krugman: “Then I start to wonder.”
Joe Kernen: “Government spending as a percentage of GDP [Gross Domestic Product]?”
Paul Krugman: “We have several European countries that are right at the 50 line.”
Joe Kernen: “But is there anything to the notion that money is treated better in the private sector, where there’s accountability and people minding the store?”
Paul Krugman: “There are some things that government does better that the private sector, like taking care of people who are in desperate need. Health care seems to be something. Health Insurance the government runs better.”
Joe Kernen (interrupting): “Do you see innovation continue if the government?”
Paul Krugman: “Of course. That’s. There are so many myths out there. Half the time, more than half the time, when anybody tells you about some great innovation, ‘That wouldn’t have happened under socialized medicine,’ it turns out the innovation was made in Europe or Australia, not here.”
Michelle Caruso-Cabrera: “A lot of the critics of that approach would say in Europe they have rationing. Let me finish. What happens is that you end up not giving care to the elderly as much as you would to younger people, because they’re going to live longer. They’re more deserving. What a lot of people here say is ‘Look, we all ration, right? We all have unlimited wants but limited means.’ And the question comes down to who will do the rationing? Will it be the individual or will it be the government? And should it be the person who is in charge of their own life to make their choices, and have good choices about health insurance rather than ceding to the government?”
Paul Krugman: “What planet are those people living on? As far as I can make out, it’s my insurance company, not me, who is making those choices. And I have insurance.”
Michelle Caruso-Cabrera: “Because it’s provided by your employer, right?”
Paul Krugman: “Right.”
Michelle Caruso-Cabrera: “Because it’s 3rd party payer. Will you acknowledge that? No?”
Paul Krugman: “No, when you get a private personal insurance policy, which by the way that market has never worked anywhere.”
Michelle Caruso-Cabrera (interrupting): “Because there is very heavy government intervention in that market.”
Paul Krugman: “No, that market has never worked well anywhere.”
Michelle Caruso-Cabrera: “It’s never functioned ever. It’s never been allowed.”
Paul Krugman: “It functions worst where there’s the least intervention. But, but this notion of rationing. The notion that. Look, everybody talks about hip replacements. It’s true that you have a longer wait for a hip replacement in Canada than here. Who pays for hip replacements in America? Medicare. This myth that the rationing is coming because we have a private system. We actually have less rationing because we spend more money. The French system has almost no rationing. It’s a very heavy government intervention…”
Joe Kernen (interrupting): “I want you to come back. I have questions about the two kinds of fairness. Somehow the government figures out outcomes, rather than a meritocratic system?”
Paul Krugman: “I think we could go on like this for a while.”
Joe Kernen: “Equal outcomes for our citizens?”
Paul Krugman: “No, but there’s a long distance between that and saying. I mean, if you had talked to people in 1925 and talked about the economy we had in 1955, with Social Security and Unemployment Insurance and these kinds of things, they would have said ‘This capitalism will collapse.’ In fact, the post-War [World War II ended in 1945] generation was the best economic growth we’ve had in a very long time.”
Joe Kernen (interrupting): “I’m scared of 50% government spending. I can’t go there with you.”
Paul Krugman: “But it’s not going to happen here, right?”
Joe Kernen: “You said you’d let it happen.”
Paul Krugman: “No, I said that’s where I start getting nervous.”
End of the interview.
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Read more:
http://video.cnbc.com/gallery/?video=3000101427
http://krugman.blogs.nytimes.com/2012/07/11/zombies-on-cnbc/
http://www.cnbc.com/id/15838087/
http://www.huffingtonpost.com/2012/07/11/paul-krugman-cnbc_n_1664771.html
http://www.cjr.org/the_audit/daily_show_eviscerates_santell.php?page=all
www.businessweek.com/news/2012-07-11/peregrine-customers-claims-priced-at-25-cents-on-dollar
http://dealbook.nytimes.com/2012/07/10/regulators-charge-futures-brokerage-with-fraud/
http://money.cnn.com/2012/07/11/investing/pfg-wasendorf/index.htm
http://www.nytimes.com/2012/07/13/opinion/krugman-whos-very-important.html?hp
http://www.archives.gov/exhibits/charters/constitution_transcript.html
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FAH-Q Me!
FAH-Q = For All to Hear & Question. ; )
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Advance to minute 2:20 of The New York Times’ “TimesCast” to see an example of an Ignorant Conservative/Ignorant Republican voter in Columbus, Ohio by the name of Isaac Shupe, who is susceptible to the rhetoric of campaign commercials and repeats those talking points in place of his own reasoning.
Today on TimesCast
The Times’s Jeff Zeleny previews Super Tuesday | The changed perspective of a Republican voter in Ohio.
http://video.nytimes.com/video/playlist/timescast/1247467375115/index.html?hp
Could The New York Times’ reporter and the editors of the video have taken Isaac Shupe’s words out of context? Yes! We do not know what Isaac Shupe said off camera, we only know what he said on camera. That is why it is necessary to keep questioning the sources of our information: campaign commercials, TV/Radio/Internet/Print News reports, your neighbor, me, everybody. For All to Hear & Question…that goes for everybody.
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Can you feel your soul? I can feel mine. Wishing people dead is not good for my soul. I can feel it. I still hold on to the hope that Fact & Evidence, Reason & Sense will win out over the people who lie, cheat and steal…and that We, the People, will V-O-T-E for the best ideas and the best solutions that benefit the majority of Americans. Maybe there is hope of changing the greedy, self-serving demagogues and sophists, like the Koch Brothers, Karl Rove and Dick Cheney?
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“Save the Rich”
“Save the Rich” – Garfunkel and Oates with Weird Al Yankovic
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fandecande 