Wednesday, June 18, 2008

The End is Near: A Gross Simplification

The movement of Iraqi and US forces into Maysan and Amarah is another demonstration that the end of major conflict in Iraq is at hand. Iranian forces are scattering but a few are sticking around for the fight. Key arms smuggling areas are coming under the control of Iraq. Iraqi forces are functioning well. To some extent, there is still a game of "whack-a-mole" being played, for example, 150,000 Taliban are grouped in the mountains of Pakistan, ready to do battle in Afghanistan, but Iraq is close to being free of insurgents. Yesterday, the bomb in Baghdad that killed 45 people in a public market reminded us that suicide bombers will be around for a long while but, again, the sweep into Maysan and Amarah shows that insurgents are quickly running out of places to hide.

A Complicated Negotiation

So, if the war is essentially over, why does Iraq need US peace keeping forces? Maybe this seems like a tough question and maybe not. After all, the battles between the Mesopotamians and the Persians go back a few years. Can we foolishly assume a lasting peace is at hand? Yes and no! It is my belief that the long negotiations with Iran are almost at their conclusion, both sides are ready to "make a deal". A simple cost benefit analysis clearly supports the common sense of signing off on several long term trillion dollar commercial deals that will enrich the Iranians and provide lower cost fuel to the world. Doing so requires and attitude modification. How difficult is that? There is nothing simple or easy about these negotiations.

The push of the US political left to withdraw from Iraq now is absolutely silly. It would be absolutely silly to come this close to ending the support of terrorism by Afghanistan, Iraq and Iran only to withdraw just before succeeding. Iran needs to know that US forces are not going to go away for as long as there is a need for them. As a sovereign nation, it is up to Iraq to negotiate the terms of the US deployment of troops in Iraq.

After WWII, many in the USA were opposed to the Marshall Plan. At the time, who would have believed that today Germany would not only be reunited but would be a member of a 27 nation European Union with one currency, a central bank and a rotating presidency. Who would have thought it possible that the French would take the presidency of this European Union this year? But the European Union continues to struggle and just this past week Ireland voted down the new "constitution".

The political struggle in Iraq is no different than the political struggles of the US and of Europe. There are many factions with many agenda and with many ideas and attitudes about the deployment, but the Iraqi people generally recognize that US bases are important. The stationing of troops in Europe has been a good thing. Centuries of war in Western Europe have ended. It is possible to end centuries of war in the Middle East.

Ending the Energy Crunch

It is interesting that the NPRA (the National Petroleum Reserve - Alaska that is bigger than ANWR) is seldom a part of the drilling debate. The Bureau of Land Management occasionally leases part of the NPRA for drilling but it also throws a bone to environmentalist along the way and declares a little bit more of this 23 million acre petroleum reserve to be a nature reserve.

The NPRA was originally created by Harding as a Naval Petroleum Strategic Reserve. This was back in the days when ships were being converted from coal power to oil power. Nuclear powered vessels show that the times have changed much more than our attitudes. I mention the NPRA to ease the anxiety of the "peak oil" alarmist who believe we are about to suffer greatly when we run out of oil, soon. The point is that there are still trillions of barrels of oil in the ground, enough supplies to last a very long time. The question remains, are we going to produce our oil or are we going to pay out the nose for foreign oil?

This week, McCain did a partial 180. In 2000, when he was running as the "maverick" opponent to George Bush, he became a zebra republican. Like Obama and Hillary, McCain has been willing to go with the politically expedient answer rather than with what makes economic sense (it is sometimes unclear if Obama or McCain understands the economics of a situation but they both seem to understand the politics). The result has been his opposition to drilling off the coast of America. His 180 was partial because he did not include ANWR in his "conversion experience". McCain now supports drilling of the Atlantic and Pacific Coasts with the stipulations that the states should decide and that the states should share in the massive revenues.

McCain, like the rest of the "falsie environmentalist" totally ignores the TAPS. TAPS is the Trans-Alaska Pipeline System. It cost billions of dollars to build this system and, yes, building it was harmful to the environment in many ways. Interstate 40 from Wilmington, NC to Las Angeles, CA was in harmful to the environment in many ways. The cutting down of trees to build your house was harmful to the environment in many ways. Air conditioning your home is harmful to the environment in many ways. Drilling for oil off the coast and building the pipeline system to transport the goods will be harmful to the environment, but the TAPS is already built!

At the peak, about 2 million barrels of oil per day flowed through the TAPS. Today, about 700,000 barrels flow through. This number is about to go back up a few notches as other projects are brought on line but why not drill on a small part of ANWR instead of on the Atlantic coast? Better still, why not auction some leases in ANWR and some along the coast so that the market price will tell us what to do next. You see, no one really knows just how much oil and gas there is in either of these areas. The geological information leads us to believe the coast is very rich in gas and a little bit rich in oil and that ANWR is very rich in oil and only a little bit rich in gas but a little exploration would tell us a lot.

Four Hundred Trillion Metric Cubes of Gas

In recent weeks, interested parties have become well aware of the 26 Trillion Meters of Gas in Iran. It is easy to make fun of a people who sit on the second highest reserves of gas while freezing in the winter time. It is estimated that there are more than 400 Trillion Meters of Gas along the coast of the USA and we do not laugh about paying $4 for gasoline.

Many an Iranian has converted his car to run on natural gas because there is rationing of gasoline, but a free people understand the laws of supply and demand. We understand that the price will allocate supplies to where they are needed the most. We understand that supply will meet demand at the market price and that the way to keep price down is to increase supplies as much as possible while using those supplies as efficiently as possible. Iran's failure to allow the market to price supplies has resulted in great waste of supplies in past years. The market still works, even after the government artificially sets price. The extra low price in Iran has resulted in massive waste and forced rationing.

Where is Obama's 180

So far, Obama has struggled to move toward the middle. He is no longer calling for an immediate pull out of troops in Iraq and he is no longer ready to meet with terrorist leaders without preconditions. The question for Obama is, How fast can he move toward the middle without making his lefty supporters really mad?

He just did another partial 180 in regard to his social security plan. During the primaries, he was ready to raise the payroll tax on everyone making more than $90,000 per year. This week he moved the increase way up. He now says only those making $250,000 or more will see the increase. The good news for those who want to privatize the system is that his proposal breaks the social security concept into pieces.

His plan converts social security from a retirement plan to a welfare plan. Those paying the extra get no additional benefits. In the end, it will be the middle class who will suffer, when SSN becomes the minimum welfare benefit. In effect he is going back to the democratic play book. He is pulling the AMT trick again. The AMT was passed as a tax only on the rich. Today, millions of Americans pay higher taxes due to the AMT. $250,000 is high enough to make us all think this is a rich mans tax, but is it indexed for inflation? What an upside down world? It was once a single dictator who won control of a government and then confiscated the property of the people. Now it is a tyranny of the majority. So many people are feeding off government grants that they are willing to convert a supplemental retirement plan into a tax and spend plan. The revenues that Obama will raise with this plan will be added to the general fund spending until the year 2017.

Great Opposition and Great Freedom

Senator Baukus is trying to tie Bush's hands in Iran and Iraq. The conference of Mayors, the new experts on foreign policy, have voted to tie Bush's hands in regard to Iraq and Iran. The situation is that it take a gross simplification to say that the end is near.

In the mean time, the heavy tax of high oil prices is causing a slowdown in the world economies. It is also causing a boom in high tech spending. US production of high tech equipment soared 25% this past year! The US economy, in particular, will benefit from the resolution of the conflict with Iran. 80 nude cyclist in England got very cold last week as they rode around in protest of global warming. Like Ron Weasly said, "She needs to get her priorities in order!"

Time are good. We simply do not believe it!