Missing Everything Important About The Racial Wealth Divide

The current issue of The New Yorker has an article by James Surowiecki on the subject of "The Widening Racial Wealth Divide."  Surowiecki's article is in turn substantially based on a recent (August) Report from a couple of left-side think tanks, the Institute for Policy Studies and the Corporation for Enterprise Development.  In addition to Surowiecki's New Yorker article, the IPS/CFED Report got substantial coverage over the past couple of months from many of the usual "mainstream" sources.    

The headline out of both the Article and Report is that the "racial wealth divide" in the United States is not only large, but growing.  Note that this is about "wealth" rather than "income" -- a variation on the usual "income inequality" theme that gets the lion's share of the attention from the likes of Obama, Clinton and de Blasio.  According to the Report, the average black household in the U.S. has wealth of $85,000, while the average white household has wealth of $656,000.  That's a difference of almost a factor of eight, and is indeed large -- far larger than the approximately 40% income differential between the races.  IPS/CFED choose a 30-year period for comparison -- 2013 against 1983.  Back in 1983, they report that the average black household wealth was $67,000, while average white wealth was $355,000.  Thus, while both have grown, the gap has "widened."  

The numbers, say IPS/CFED, are derived from the Surveys of Consumer Finances (SCF) for 1983 and 2013.  These surveys, done only once every three years, come not from my usual whipping-boy the Census Bureau, but rather from the Federal Reserve Board, of all places.  Here's the 2013 version.  Just checking to see if I can find one headline number from the IPS/CFED Report in its stated source, it quickly emerges that the think tanks have made a large and rather debatable adjustment in order to maximize the size of the reported wealth divide.  A chart on page 12 of the 2013 SCF gives "mean net worth" in 2013 for "White non-Hispanic" and "Nonwhite or Hispanic" as $705,900 and $183,900 respectively -- rather different from the $656,000 and $85,000 from IPS/CFED.  The Fed's reported "divide" is a factor of under 4, rather than the almost 8 from IPS/CFED from the same data.  Still large, but how did it get doubled?  Looking for an explanation I go all the way to the end of the Report and find this in a brief paragraph headed "Methodology":

The main difference in this framing from the standard SCF definition of net worth is the exclusion of consumer durable goods (i.e., automobiles, electronics, furniture, etc.). This definition is rooted in the idea that wealth should be readily converted to cash (i.e., fungible), and durable goods are not.    

With that Surowiecki and the think tanks then turn to what they believe to be the causes of the wealth disparity.  Note that the FRB's Survey of Consumer Finances reports do not address the issues of causation in any way -- the SCFs are just dry collections of data.  In other words, when Surowiecki and IPS/CFED start talking about causes, they are purely making it up.  

So, guys, what are the causes?  You won't be surprised to learn that the causation theories of these people consist largely of blaming the evil successful people, while completely missing obvious recent policy changes -- like the explosion in food stamp and Medicaid usage during the Obama administration -- that have intentionally driven down the already modest wealth of relatively low-wealth people. From Surowiecki:

[T]he wealth gap between black and white Americans is much bigger than the income gap, thanks to a toxic combination of institutionalized discrimination, persistent racism, and policies that amplify inequality. . . .  [D]iscrimination, though no longer legal, is still pervasive. It holds down black incomes and has a huge impact on homeownership—which Shapiro identifies as “the largest driver of the racial wealth gap.” Only forty-one per cent of black Americans own their homes, compared with seventy-one per cent of whites, and black homeowners earn a much smaller return on their property.

But after talking so confidently about this "pervasive" "institutional discrimination," Mr. Surowiecki does not provide a single significant current example.  He does, however,  talk of long-ago federal policies that were in place from about the thirties to the sixties:

Beginning in the New Deal and on into the postwar years, the federal government invested heavily to help ordinary Americans buy homes and go to school, via programs like the Federal Housing Administration and the G.I. Bill. That fuelled an economic boom and fostered the growth of a prosperous middle class. But black Americans received little of this assistance.

The closest Surowiecki comes to giving a present-day instance of real racial discrimination comes with this howler:

As Asante-Muhammad [one of the authors of the IPS/CFED Report] told me, “White people still do not generally want to live in a neighborhood that’s more than twenty to twenty-five per cent black.” That means fewer buyers, which holds house prices down. Shapiro has found that housing segregation costs black families tens of thousands of dollars in home equity.   

Really??  This guy writes for the New Yorker and yet seems unaware that whites are currently, and have for a decade and more, been moving in large numbers into formerly majority-black neighborhoods in New York City like Harlem in Manhattan, Fort Greene, Bedford-Stuyvesant and Bushwick in Brooklyn?  That process of "gentrification" has made millionaires and near-millionaires out of thousands of formerly not-well-off black homeowners -- a process that the official New York groupthink somehow finds to be evil.  See Spike Lee's rant on the subject at my post here.  Well, which is it -- gentrification is happening and is evil (Lee and NY groupthink), or gentrification is not happening but would be good if it happened (Surowiecki)?  This much I know:  gentrification is happening, at least in large swaths of New York City.  Surowiecki seems to know neither the facts nor the official party line.

Now, turn your attention away from both Surowiecki and the IPS/CFED Report and look at the underlying 2013 SCF survey.  You will be struck by one very noticeable thing that neither Surowiecki nor IPS/CFED discuss:  net worth for blacks and Hispanics, and indeed for the entire bottom 20% of the wealth distribution, has been declining dramatically in the most recent years.  This isn't just a widening of the "divide" between wealthier and less wealthy even as both see growth in wealth; no, the levels of wealth at the bottom, already low, have actually dropped in absolute terms.   

We know this because the 2013 SCF shows the results of both the 2013 survey and the prior version of same, which was three years earlier in 2010.  And in that three year interval there was a dramatic worsening of the wealth situation not only for blacks and Hispanics, but also for the entire lower 20% of the wealth distribution.  According to the 2013 SCF, during the 2010-2013 interval, the mean net worth for Nonwhites and Hispanics went down from $189,000 to $184,000; the median net worth for Nonwhites and Hispanics went down from $22,000 to $18,000 (almost 20%!); the mean net worth for the bottom 20% of the wealth distribution went down from $82,000 to $65,000 (more than 20%!); and the median net worth for the bottom 20% of the wealth distribution went down from $7,000 to $6,000.

Thus while the IPS/CFED Report shows black and Hispanic wealth increasing somewhat in the 1983-2013 period (although more slowly than the rate of increase for whites), they don't mention that even that modest progress stopped and went into reverse in 2010-2013.  These were three years of supposed economic recovery.  Now, what occurred in the the three-year interval 2010-2013 that might have such noticeable negative effects on the modest wealth of people at the bottom of the wealth distribution, including blacks and Hispanics?  The G.I. Bill?  The FHA mortgage program?  "Pervasive institutional discrimination"?  

These were of course the early years of the Obama administration.  And the thing that happened in those years that obviously had a dramatic effect on the wealth of those at the bottom of the wealth distribution was the explosion in means-tested government handout programs, most notably food stamps and Medicaid.  The Obama administration set out aggressively to increase the enrollment in food stamps, and drove it up from about 27 million in 2009 to 48 million in 2013.  But enrolling in food stamps requires a family first to get its assets down to near zero.  Here is the USDA's page on eligibility requirements for the "SNAP" (food stamp) program, which states off the bat that someone seeking the benefit must get so-called "countable resources" under the very low figure of $2250.  

Medicaid enrollment also rose dramatically from 2010 to 2013 (although not as dramatically as enrollment in food stamps), going from 50.5 million to 55.0 million according to data from KFF here.  (The bigger explosion in Medicaid occurred after the full implementation of Obamacare began in 2014.)  Medicaid also requires prospective beneficiaries to come close to zeroing out their assets.  Here is a government website describing the (highly complex) eligibility criteria.

So in the 2010 to 2013 period, the government was aggressively luring some tens of millions of new beneficiaries into handout programs that required prospective beneficiaries to somehow spend down or get rid of whatever assets they had.  Is this enough to swing the numbers for reported wealth of the bottom 20% of the wealth distribution -- consisting of only about 30 million total households?  Absolutely it is.  

A couple of questions:

• Did nobody realize that hugely expanding programs like food stamps and Medicaid with very low asset criteria for eligibility was going to have a strong negative effect on the already modest wealth of the less wealthy?
• How can people like Surowiecki and these think tanks talk about alleged "causes" of the racial wealth divide like the G.I. Bill and alleged refusal of whites to move into largely black neighborhoods, while at the same time completely missing the hugely obvious fact that the main cause of widening and perpetuating the wealth divide is gigantic government handout programs that have the decreasing of the wealth of the less wealthy as a principal feature of their design? 

Pay Attention To South Australia

In a post on Monday, I advised readers to "pay attention to the news out of South Australia."  The prior week, on September 28, the entire state of South Australia was plunged into a power blackout in the midst of a major rain and wind storm.  Those who follow the subject know that South Australia has made a big thing in recent years of turning itself into the world leader of "renewable" energy, principally from the wind.  Immediately prior to the blackout, SA was getting some 50% or more of its electricity from its wind farms.  I have written several posts here (for example, this one) about how difficult it will be to make a fully-functioning 24/7/365 electricity system for a modern economy when production from intermittent sources like wind gets above about 30% of total electricity supply.

So was SA's blackout caused by over-reliance on the unreliable wind, or did it have other causes?  In my post on Monday, I merely raised the question, and did not attempt to answer it.  Instead, I linked to a source with information on all sides of the issue.  Others were less cautious.   The religious promoters of wind power immediately came forward to say that SA's dependence on wind had nothing to do with it.  For example, we had Karl Mathieson at Climate Change News on September 29 ("No, South Australian blackouts were not caused by renewables") and Josh Butler at the Huffington Post also on September 29 ("No, Renewable Energy Didn't Cause South Australia's Blackout").  The alternative cause put forward for the blackout was that high winds had knocked over several transmission towers.

Well, yesterday the Australia Energy Market Operator (AEMO) came out with its first preliminary report.  Here is the press release, and here is the full report (pdf).  Key quote:

Generation initially rode through the faults, but at 16:18hrs, following multiple faults in a short period, 315 MW of wind generation disconnected, affecting the region north of Adelaide. The uncontrolled reduction in generation increased the flow on the main Victorian interconnector (Heywood) to make up the deficit and resulted in the interconnector overloading.

Translation:  nearly all the wind generation conked out all at once as high winds made it dangerous for the turbines to keep operating; and the back-up sources could not kick in quickly enough, let alone that the transmission lines to bring in the back-up power promptly got overstressed.  So the whole system went down.

Did the felling of a few transmission towers contribute in some way?  I'm not sure that that has yet been completely ruled out.  But the real question is, how much extra back-up (fossil fuel or nuclear) capacity do you need to have, and how much extra transmission capacity do you need to have, if you are going to have an electricity system getting half or more of its power from wind and hope that it will withstand major storms?

Here's a further substantial post from Australian blogger Joanne Nova.  Key quote:

The bottom line is that wind energy comes at a very high cost and makes the system either very expensive or horribly fragile or both. Given that wind farms aren’t providing cheap electricity — when the infrastructure and the costs of having back up “spinning reserve”  and baseload is taken into account — what’s the point of adding all this risk to the system? To change the weather?

Meanwhile, back home here in New York, we just committed in August to a new "renewable portfolio standard" of getting 50% of our electricity from "renewables" by 2030.  Brilliant!  Has anybody even considered the question of whether or how this thing is actually going to work?  The good news is that between places like South Australia, and others like Germany and Denmark that haven't had a big disaster yet but are operating very much on the edge, we are likely to have some bad experience of others to learn from before we dig ourselves too far into this hole.   

The Face Of "Deep Poverty" In America

The famous line, attributed to Mark Twain, is, "There are three kinds of lies: lies, damned lies, and statistics."  Readers here know that I have been a frequent severe critic of the federal government's statistics on the subject of poverty.  At the time of their creation, these statistics may have borne some relationship to real poverty as you think of it -- physical deprivation, including lack of enough to eat or adequate clothing -- but any such relationship that may have once existed has long since gone away.  Today the "poverty" statistics fairly fit Twain's description -- they are far worse than mere "damned lies."  

The reason is that all kinds of people whom you would never think of as poor, and who are not poor in any real sense or suffering from any sort of physical deprivation, are lumped into the statistics.  In calculating the "poverty" rate, Census counts only "cash income" in the current year, a statistical artifact that arbitrarily excludes substantial resources that people have available to them to live comfortably.  Large categories of obviously non-poor people counted in the "poverty" statistics include retirees living on ample savings or home equity, students living on scholarships and fellowships (do you know that affluent Ithaca, New York, has a reported "poverty" rate exceeding 40%?), twenty-somethings living off resources of affluent families, and otherwise successful businesspeople having a bad year -- and that's before we even get to the vast population of government dependents living on government handouts, nearly all of which are also systematically excluded from the artificial definition of "cash income."  (This does not mean that there are no bona fide poor people included in the poverty statistics, but only that the reported numbers are wildly overstated, and we are given no meaningful information on the real state of poverty in the country.)

But of course the fake Census statistics are useful for advocates of more government spending and programs, who can use the inflated numbers to tug on the heartstrings of the uninformed.  For example, here we have Clyde Haberman, writing in the New York Times on May 1 and using the fake government poverty statistics to advocate for more government spending to alleviate the suffering of the poor:

Nationwide, the Census Bureau counts 46.7 million Americans as living in poverty, which for a family of three (typically a mother and two children) means annual earnings of less than $20,160. About 20 million people live in deep poverty, with earnings below $10,000 a year for a family of three.

Twenty million in "deep poverty" -- that sounds bad, a lot worse than mere "poverty."  Are your heartstrings tugged?  How bad must the sufferings of these people be?

Well, consider one of them:  Donald Trump!  

His "cash income" in 1995 is now reported to have been a negative $912 million.  Talk about "deep poverty"!  It's way less than $10,000 -- and he had a family of five to support at the time.  He could well have been the "poorest" person in the whole United States in 1995 -- at least if you define "poor" the way the geniuses at our Census Bureau define "poor."  And the suggestion is that Trump then used the negative $912 million to zero out his "cash income" for up to eighteen years after 1995.  He was likely in "deep poverty" all the way up to 2013!  Is it any wonder that our "deep poverty" rate is so high?  

You are probably wondering, could it really be possible that the U.S. Census Bureau, in calculating the "poverty rate," could count a businessman like Trump in "poverty" for almost two decades just because he had a bad year in which he took a write-off that zeroed out his income and then some?  And the answer is, absolutely he would have been counted in "poverty" in 1995 and all the way until the negative was exhausted.  It's just the way the "cash income" numbers shake out.  Trump fell in one of the many categories of non-poor that are used to gin up our fake statistics.  (Note that it is unlikely that Trump was personally surveyed by the Census.  But the Census sample is plenty big enough that it will inevitably include numerous members of Trump's "businesspeople with write-offs" category.)

But, you say, Trump is just a fluke, and flukes like that can't really skew the numbers much.  Not at all.  Lots of businesses have periodic losing years, even though overall they are successful.  How many instances are there in any given year of businesspeople with a negative year who get counted in poverty?  And the answer is, you will never find that out from the Census statistics or any other information that they put out.  Nor will you find out how many said to be in "poverty" are actually students from affluent families, or retirees living comfortably on savings or home equity loans or proceeds from sale of a house, or people taking a year off from successful careers, and so forth.  Sorry, but those are state secrets.  If we let that information out, how would people like Clyde Haberman be able to tug at your heartstrings with cries of tens of millions in "deep poverty"?   

Donald Trump's Taxes, And Yours (And Mine)

The progressive media establishment has now moved into the long-anticipated full attack mode against Trump in the final run-up to the election, and the official big story of the moment is the revelation in Sunday's New York Times of a few pages of Trump's state tax returns for 1995.  It seems that in that year he declared a loss of some $916 million.  That in turn might mean that he went for many years thereafter paying little or no income tax.  Cue the outrage!

My favorite part is the terminology with which Pravda chooses to discuss this tax situation.  In Monday's front page article, the lead headline is "Trump, the Tax Code and a Loophole for the Rich."  The headline in the online version of the same article is "How Donald Trump Turned The Tax Code Into a Giant Tax Shelter."  Quotes in the articles from the Times's chosen sources repeatedly use the terms "loophole" or "tax shelter" or some other comparable words of opprobrium.  For example, we have Steven Rosenthal of the Urban-Brookings Tax Policy Center:

“If it wasn’t clear before, it is now: The tax code is tilted toward the rich in its statutory framework, its exceptions, and in how it is enforced and administered,” said Steven M. Rosenthal, a real estate tax specialist and senior fellow at the Urban-Brookings Tax Policy Center.

Meanwhile, even at sources like Fox News -- where several talking heads have stepped up to defend what Trump apparently did -- the defense has been that his tax position was "legal" and essentially "if you don't like what he did, change the tax law."  It's hard to find anyone to articulate the obviously right view, which is that this is how the tax code should work, and indeed has to work, and there is little to nothing that can or should be done about it.  For a lonely example of a very brief and not fully articulated defense of the current tax code on this point, see Warren Meyer at CoyoteBlog here ("Yes, Let's Make Entrepreneurship and Business Formation Even Harder").

Here's the fundamental problem: The tax we are talking about is a tax on "income."  An "income" tax just doesn't fit very well with those people who live, not off "income," but rather off of assets.  The concept of "income" is very easy to define in the context of wages and salaries.  You worked during the year, and you were paid in cash during the year.  That's income to you for that year, and you must pay the stated proportion of it in tax.  Easy.  But there are many people who do not earn income in this way.  Millions of people, including many who are not at all "rich" or "wealthy," live primarily off assets.  As one example, very large numbers of retirees -- many tens of millions -- live wholly or largely off assets accumulated during a lifetime of savings.  Many, maybe even most, businesses are involved in some way in realizing revenue by dealing in assets.  Real estate businesspeople are a large category of those who live by extracting revenue from assets.

So if you own assets, and derive revenue from them, what part of that is "income" subject to the income tax, and what part is not?  It turns out that the answer to this question is almost entirely arbitrary.  The tax code defines some extractions of income from assets as "income," and some not.  It's whatever the tax code says.  Dividends?  Income!  Interest?  Income!  Withdrawal from savings?  Not income!  Except if the withdrawal is from a 401(k) -- then it's income!  Depreciation?  A subtraction from income!  Sell an asset?  Income -- but only to the extent of the excess of sale price over purchase price!  Borrow money against your assets?  Not income!  Why?  Because those are the rules we have established!  It's not that there is no logic to it, but the rules could easily be very different, and there are huge elements of arbitrariness.  If the rules were different, they would still be just as arbitrary. 

Every election cycle one or more candidates comes forward to propose revisions to the tax code supposedly to make it so simple that you can file your taxes on a post card.  In the recent primary season, Ted Cruz was one such candidate.  That proposition makes sense as to wage and salary income.  But, if you want to have a regime that deems some part of revenue derived from assets to be "income," there is nothing you can do to make it simple.  It will always be inherently arbitrary.  And because it is arbitrary, it will be subject to gaming. 

Here's an obvious illustration of the problem.  Say Warren Buffett owns $10 billion of Berkshire Hathaway stock and its value goes up in a year by $1 billion to $11 billion.  Does Buffett owe income tax on the billion dollar increment?  This is in fact how Buffett makes most of his money.  The answer under our tax system is that increase in value of assets, unless they are sold, is not a taxable event; so Buffett owes nothing on the incremental billion.  And when Buffett writes op-eds about how high a tax rate his secretary pays compared to his own, he completely leaves out that most of his "income" is defined by the tax code as "non-income" and not subject to tax.  Does that sound fair to you?  So, should we make it such that increase in the value of assets is taxable each year?

Good luck with that.   You've caught Buffett, and forced him to pay maybe $350 million on his incremental billion; but meanwhile, does every homeowner in the country (there are about 87 million of them) need to get an appraisal of the house every year and pay income tax if the value went up?  Unfortunately, the large majority of those 87 million people won't sell their house this year and are simply not going to have the money to pay the tax on an increase in value.  Should they all be sent to jail?  This is not going to work.  The reason we don't tax increase in value of assets except on sale is the simple practicality that if we try that it will mostly be impossible to collect the tax.

So we tax assets only on sale.  On all of the value?  No, on the difference between the purchase price of the asset and the sale price.  Why?  There is a logic, but at heart it's another arbitrary rule.  And what if the sale price of the asset is less than the purchase price?  For example, suppose a taxpayer has some assets that have increased in value and others that have decreased.  Should it really be that he must pay tax on the increases and get no offset for the decreases?  If you have that rule, then people who in fact have seen massive decreases in net worth will still face big tax bills.  Your business went broke and lost $500,000, but you made $100,000 in the stock market -- do you really need to pay tax on the $100,000 with no offset for the loss?  Many heartrending cases will come forward -- and among not-wealthy people.  So again, that won't work; and the rule is, you can offset.  

And once the rule is that you can offset losses against gains, you find that, since tax is only due on sale, people have discretion as to when to sell.  They sell the assets where they have had losses, and sit on the gains.  Why voluntarily incur tax when you don't have to?  As I said earlier, whatever rules you set up as to taxation of income from assets, those rules will be subject to gaming.  There is no way around it.

So is there any sense in which what Trump did was to use a "loophole" or a "tax shelter," or was it just an application of the established tax code definition of "income"?  I would say the latter.  And if you propose "closing the loophole," what exactly is the proposed fix?  End the carryforward of losses?  That would just mean that Trump would be forced to sell some assets with gains in 1995 to offset within the year, or alternatively hold on to some of the losses for whatever years necessary until he had offsetting gains to use within one year.  The result would be no more tax revenue for the government, but would it somehow be good for the economy?  Not that I can see.

Meanwhile, fast forward to today.  The likelihood is that the $916 million loss carryforward has been used up.  The real estate assets that Trump bought in the 80s cratered in the early 90s and led to the 1995 loss.  But the assets that he acquired more recently, particularly those in New York, have likely performed very well.  I strongly suspect that today Trump funds his lifestyle and even his presidential campaign in that time-tested game of the real estate entrepreneur, borrowing against the appreciated assets.  In the real estate game, they call it "taking some money out of the property."  Usually, if the rent coverage of the debt service is sufficient, you can borrow "non-recourse" -- you don't even owe the money back personally!  Oh, and the borrowing is not a taxable event.  You don't even need to mention it on your tax return.   Hey, it's just how the system works.  Did you report it as taxable "income" when you took out a mortgage to buy your house?  Neither did I!      

The Fuzzy Math Of Renewable Energy

I often think that the allure of progressivism mostly turns on inability to do basic arithmetic.  My Exhibit A is affordable housing in Manhattan, where we spend in many cases $100,000 per year to subsidize a family to live in a premium location, only to have the family remaining in "poverty" or near-poverty.  How can this possibly make sense?  But here's something that might make even less sense:  the fuzzy math of renewable energy; or, more precisely, the fuzzy math of how much it will cost to try to make a fully-functioning electricity system run primarily on intermittent sources of power like solar and wind.

You probably missed it, back in September 2014, when then-new Mayor Bill de Blasio made the big announcement that New York City would be reducing its "greenhouse gas" emissions 80% by 2050.  (You always have to love those non-binding commitments by politicians for years long after they will have left office and when most of us will be long dead.)  Here is a picture of de Blasio on the day of that announcement, marching arm-in-arm with the likes of Al Gore and Ban Ki-Moon.      

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So, how to get from here to an 80% cut in CO2 emissions?  The big idea, if you want to call it that, is to use lots more solar and wind power.  But those things only work part-time, and not on demand; so to turn them into a fully-functioning electricity system you need some combination of back-up power from dispatchable sources, and/or storage.  And if it's only the back-up from dispatchable sources, without the storage, then you're probably going to find the dispatchable sources supplying most of the power most of the time.  If you want well upwards of 50% of your power to come from solar and wind, you are going to need storage.  A lot of storage.

And that brings us to the latest:  Last week New York City announced that it would become the first municipality in the U.S. to have a target for energy storage deployment as part of its commitment to cut CO2 emissions.  From Green Tech Media:

Only two U.S. states, California and Massachusetts, have set targets for energy storage deployments. Now New York City has joined them.  The city government unveiled a storage goal of 100 megawatt-hours by 2020 last week. . . .  

And over at Solar Industry Mag, you can feel the excitement:

According to the mayor, this [100 MWH] target will help reduce reliance on the grid by making variable sources of energy production, such as solar panels, usable for more of the day. Energy storage also helps increase the city’s resiliency by providing backup energy when the grid is offline.  “New York City’s new solar and energy storage goals will bring even more clean energy jobs, cleaner air, and electric system benefits to the Big Apple and will help us get the most out of our solar resources,” commented Donna De Costanzo, director of Northeast energy and sustainable communities at the Natural Resources Defense Council.

One hundred megawatt-hours of storage capacity -- that sounds like a lot!  Or does it?  To put it in a little context, a Tesla comes with a battery pack with about 85 kilowatt-hours of capacity.  So New York City's 100 megawatt-hours would represent the storage capacity of around 1200 Teslas.    Cost?  Tesla says it can now produce the battery packs for around $12,000 each.  (Industry critics think it is really double that or more, but let's give them the lower number for these purposes.)  That means that the 100 MWH of storage capacity will cost around $14.4 million.  That's kind of a rounding error in New York City's budget, currently running over $80 billion annually.  And we have all the way to 2020 to accomplish this.  No problem!

But perhaps we should ask, about how long will the 100 MWH of power last our fair city when the wind stops blowing in the middle of the night?  To make that calculation you need to know our ongoing level of usage of electricity, which as far as I can find runs around 10,000 to 12,000 MW.  A little simple arithmetic, and you calculate that when the sun and wind go blank the 100 MWH will carry the City for about -- 30 seconds!  

So maybe we had better buy, say, a full day's worth of storage capacity, just in case we're dealing with a heavily-overcast calm day in the middle of the winter.  Multiply the $14.4 million by 120 (to get an hour) and another 24 (to get a day) and you get a total cost for the storage capacity of $41.472 billion.  This is no longer a rounding error.  And by the way, nothing says that we can't have two, or even three, consecutive fully-calm heavily-overcast days in the middle of the winter around here.  Are we really going to try to deal with this in any meaningful way with batteries?  For a full three days' storage capacity, we'd need the equivalent of over 10 million Teslas worth of batteries.  Is there even that much lithium available in the world?

Of course, we could always deal with this problem by having a full set of back-up dispatchable power plants at the ready for the calm nights and cloudy days.  At around $3.5 billion per 1000 MW capacity, that will be another $50 billion or so for back-up capacity you may use say, three to five days per year.  No problem!  I could try to criticize de Blasio for not playing straight with the citizenry when he makes big announcements that he is wasting some millions of dollars on totally meaningless amounts of storage capacity, but why bother?  I really don't think he is capable of doing this level of arithmetic.

Meanwhile, pay attention to the news out of South Australia.  That's the large Australian state covering the middle-southern section of the country, with the main city being Adelaide.  On September 25 something called the Grattan Institute put out a Report on the situation of electricity supply in South Australia, and warning of problems to come.  It seems that South Australia has set out to make itself the world leader in generating electricity from renewables, mostly wind.  According to the Grattan Report, wind now supplies about 40% of the electricity in South Australia.  Is that any problem?  The Report discusses two big issues:  (1) the intermittency of the wind power is leading to wild price swings in the wholesale electricity market when the wind suddenly stops blowing and there is a shortage of back-up, and (2) the intermittency also affects the reliability of supply.  From the Report:

On the night of 7 July, the wind was hardly blowing in South Australia and the sun had gone down. Two coal plants had closed earlier that year, and an electricity connection that provides power from Victoria was effectively closed for upgrades. As a result, gas was supplying nearly all the state’s power needs. At 7.30pm, the wholesale price of electricity shot up to $8900 per megawatt hour, a staggering sum when wholesale prices in the eastern states average about $50 per megawatt hour.  Price spikes are a fact of life in the electricity market. Far more troubling was South Australia’s average wholesale price for the month of July - $229 per megawatt hour, more than three and a half times that of the eastern states. . . .   [T]here must be a separate review of the market to ensure that power flows reliably and affordably. . . .  The events of July in one state were a canary in the coalmine, warning of the risks in Australia’s power future. It is time to listen. 

Very prescient on their part!  On September 28 there was a big storm in South Australia, and the entire state was plunged into a blackout.  Was the heavy reliance on wind power and shortage of back-up the cause of the blackout?  That issue is currently subject to big dispute between backers of wind power on the one hand, and skeptics on the other.  An investigation is under way.  The precipitating cause of the blackout seems to be that the storm knocked over 20 or so big transmission towers.  But would that be enough to throw the whole state into blackout absent the problems cause by reliance on wind power?  Here is a round-up from Australian blogger Joanne Nova.  Judge for yourself.

Why Do They Use Those Private Email Accounts?

In my rather limited law practice these days, one of the things I am doing is helping the Energy & Environment Legal Institute in its cases against New York Attorney General Eric Schneiderman seeking disclosure of public records information as to his communications with other AGs and environmental activists relating to his supposed investigation of ExxonMobil.  Today we got his response in one of the cases.  The response contains a paragraph that will give you some insights into how this FOIA game works, and also why people like Hillary Clinton like to use private email accounts and servers.

In our case, the requesting entities were very alert to the private email game, and therefore they specifically requested that private email accounts be searched for requested documents.  But the New York AG's office simply ignored that specific request, and said they were just not going to do it.  Here is the response of the New York AG on that issue:

Although the Request had specified that it sought communications of Attorney General Schneiderman "using either his official or non-official email and text messaging accounts (e.g., Gmail, private cell phone as well as State-provided accounts)," the OAG does not search personal accounts of its employees in the ordinary course of fulfilling the nearly three thousand FOIL requests it expects to receive in 2016 . . . , unless the Records Access Officer has reason to believe that a personal account includes responsive records that are not also on the OAG's network. . . .  Here, the Records Access Officer had no reason to believe that the Attorney General's personal email account was the exclusive custodian of any potentially responsive OAG records.  All OAG employees, including the Attorney General, have been instructed to refrain from using personal accounts for OAG business. . . .  

(This is from page 5-6 of the AG's Memorandum of Law in Opposition to Petitioner's Article 78 Proceeding.  The document is publicly available from the court's website, but unfortunately you need an account and a password to get access.  If you have such an account, the case number is 101181/2016.)

A couple of things there are of interest.  First, they say that they don't search for private emails, even though specifically requested, unless they "ha[ve] reason to believe that a personal account includes responsive records . . . ."  Well, did they take the trouble to ask?  And the answer is, they completely fail to address that obvious question.   What's your guess as to the answer? 

And then there's that great line "All OAG employees, including the Attorney General, have been instructed to refrain from using personal accounts for OAG business . . . ."  Great!  Oh wait -- weren't all State Department employees, including the Secretary of State, instructed to refrain from using personal accounts for official business?  Of course they were!  But then, we know that at least if you rank high enough, even when caught red-handed you will not be punished for ignoring that instruction -- not even a slap on the wrist.

And just in case you don't recall from earlier this year, here is an article from the Daily Caller back in March on the systematic use by officials at EPA of private emails in their communications with environmental lobbyists.  That scandal was broken largely through persistent FOIA requests from the same Energy & Environment Legal Institute (although I did not represent them in those matters.)  Daily Caller quotes E&E Executive Director Craig Richardson as follows:

EPA has essentially outsourced it’s rule-making function to ‘green’ activists and rent-seeking lobbies hell-bent on destroying traditional energy sources in an effort to replace [them] with renewables, an industry that their wealthy benefactors are already making a killing at the taxpayer and ratepayer expense,” Richardson said.

How our government works.  And the public is not to be allowed to find out about it.  Lovely, isn't it?