Not-A-Pundit: The Renaissance

US Department Of Energy Mulling Creating Ethanol Reserve February 5, 2007

WASHINGTON (Dow Jones)–As the U.S. Energy Department looks to expand the nation’s emergency oil stockpile, officials are also considering whether it would be beneficial to create an ethanol reserve.

“Perhaps we should be thinking about having an ethanol reserve,” Energy Secretary Samuel Bodman told reporters Monday during a press briefing to discuss DOE’s fiscal year 2008 budget proposal. “There are a number things we are looking at.”

Bodman said there are several ideas being discussed as the Bush administration moves to expand the strategic petroleum reserve. The plan is to double the size of the oil stockpile, increasing it from its current capacity of 727 million barrels to 1.5 billion barrels in the next two decades.

Administration officials are also considering whether there should be storage sites built in areas outside of the Gulf Coast, Bodman said. For the first time, new reserve sites could be built west of the Rockies or on the West or East coasts, a DOE official said last week.

Aside from considering new locations for SPR sites, another question on the table is “should we have an expansion in the type of fuel,” Bodman said, noting that the idea might have merit given the administration’s newly announced goal of reducing gasoline use 20% in the next 10 years. To meet that goal, the administration is proposing to increase use of ethanol and other alternative fuels.

Still, a congressional and regulatory affairs director at the Renewable Fuels Association, a trade association for the U.S. ethanol industry, said she doesn’t see a need for an ethanol reserve anytime soon.

“I can’t image them doing that in the near-term,” said Samantha Slater, noting that an ethanol reserve is certainly not on the industry’s agenda. “We’re using every drop.”

“Having a reserve would generally imply we have some we could put in reserve,” she said, adding that that’s not the case. “At this stage of the game, that’s probably not something that would be particularly effective.”

At the same time, experts have noted infrastructural challenges inherent in the creation of an ethanol stockpile, noting in particular storage and transportation capacity.

Ethanol has a corrosive effect on pipelines so it must be shipped by rail, truck or ship to fuel terminals where it is blended with gasoline before going to service stations.

Just last spring, concerns about marketers’ ability to move and store adequate amounts of ethanol for blending with gasoline accompanied a large-scale phase-in of the fuel additive and spurred higher prices for months.

The addition of a reserve might require the construction of new storage tanks, said Rick Kment, an ethanol analyst with Omaha-based DTN, a commodities news service. Storage tanks for other fuels can be used to hold ethanol but whether there are enough existing tanks in a given location is another issue, he said.

By Maya Jackson Randall, Dow Jones Newswires

Social Security Taxes Lower Fertility, Family Formation February 5, 2007

WASHINGTON (Dow Jones)–Economists have long held that demographic trends, namely the comparatively small size of the generation following the 80 million strong, soon-to-retire Baby Boomers, are the root of Social Security’s long-term financing woes.

But a recent academic paper argues instead that it is the system’s pay-as-you-go tax structure – in which retiree benefits are paid by current workers – that caused the decline in fertility rates in the first place, and warns that raising taxes more to bring the system into better fiscal balance would only make matters worse.

The pay-as-you-go Social Security system has “independently contributed to (declining marriage and fertility rates), and thus, ironically, to the system’s growing financial vulnerability,” Isaac Ehrlich of the University of Buffalo and Jinyoung Kim of Korea University say in a paper released last week by the National Bureau of Economic Research.

It’s a bit of a chicken-and-egg question whether demographics put pressure on Social Security’s finances or vice versa. But the issue is more than just academic. With reform of Social Security and other entitlements generating greater buzz in Washington, how the problem is defined will go a long way in determining what types of changes are acceptable.

Ehrlich and Kim estimate that Social Security taxes account for more than one-quarter of the decline in U.S. fertility rates since 1950. For countries in the Organization for Economic Cooperation and Development as a whole, Social Security taxes account for almost half the drop in fertility rates, the authors say.

In the U.S., Social Security benefits are funded via a 12.4% tax on wages up to $97,500 split between employees and employers – though some economists say workers bear all of the tax since the employer share is passed on to them in the form of lower wages.

When the Depression-era Social Security program was founded, favorable demographics meant benefits could be paid to retirees without onerous taxes on workers. In Social Security’s early days there were about 15 workers per retiree, meaning the program could be financed with a combined payroll tax rate of just 2% – a fraction of what it is today. But steadily rising life expectancies and lower birthrates in the U.S. has meant that there are now only about 3 to 4 workers per beneficiary.

Ehrlich and Kim say that by putting distance between family formation and retirement benefits, the current Social Security financing structure has created a disincentive to form families.

Since benefits are defined broadly and not based on what each family’s own children contribute, the system can “induce unintended consequences” that are “not socially optimal,” they say in their paper.

“Since defined benefits are independent of contributions made by children, parents are not compensated individually for raising more or better-educated children,” according to the authors.

As a result, payroll taxes “diminish the incentive of individual workers to bear and invest in children, save for retirement, or generally form families altogether, because they lower the private rewards from family investments relative to alternative individual pursuits,” they say.

The paper therefore supports those who argue that higher taxes aren’t the way to balance Social Security. Without a fix, Social Security is on schedule to go bankrupt by 2040, when the number of retirees swamps the system’s ability to pay benefits. The fiscal crunch will begin far sooner however, as the amount of Social Security benefits eclipses the amount of revenue the government collects in the next decade.

Reform ideas generally include some mix of higher taxes, reduced benefits and an increase in the retirement age.

The White House says it is willing to listen to all ideas on entitlement reform, but President George W. Bush has been resistant to lifting Social Security taxes.

Higher taxes “could actually exacerbate the downward trends in key demographic variables, even if it could alleviate the financial burden on (pay-as-you-go) systems in the short run,” Ehrlich and Kim say in their paper.

The White House’s 2007 budget, released Monday, reflects Bush’s plan to let workers use some of the Social Security payroll tax to fund voluntary retirement accounts. Beginning in 2012, workers would be able to use up to 4% of their Social Security taxable earnings, up to a $1,300 yearly limit, to fund the accounts. That would cost $29.3 billion in 2012.

“The President continues to believe that this is part of the answer to Social Security, particularly for younger people,” Rob Portman, director of the Office of Management and Budget, said Monday.

Ehrlich and Kim seem to agree, saying individual savings accounts “might have significantly moderating effects” on fertility trends and family formation.

By Brian Blackstone, Dow Jones Newswires

Loneliness Linked To Alzheimer’s Disease Risk – Study February 5, 2007

WASHINGTON (Dow Jones)–Lonely people could be more likely to develop dementia or the type of cognitive decline commonly associated with Alzheimer’s disease, according to a new study released Monday.

Researchers, led by Rush University in Chicago, looked at 823 older people who were free of dementia at the study start and annually assessed their level of loneliness for up to four years to determine if it had any impact on the development of Alzheimer’s disease. Individuals in the group had an average age of 80.3 years when the study began. Data were collected from November 2000 through May 2006.

Overall, those who ranked the highest on a loneliness scale were twice as likely to develop the type of dementia associated with Alzheimer’s disease. Dementia refers to people who have lost memory, have trouble thinking and caring for themselves. Alzheimer’s disease is the most common cause of dementia. The findings are published in the February issue of Archives of General Psychiatry.

Loneliness was measured on a scale of one to five, with higher scores indicating more loneliness. During the first exam, the average loneliness score of participants was 2.3. Those in the highest quintile of loneliness, or a score of 3.2, were 2.1 times more likely to be diagnosed with Alzheimer’s disease over the study period as those with low scores, or 1.4. During the study period, 76 individuals developed dementia that met criteria for Alzheimer’s disease.

One of the researchers, Robert S. Wilson, explained that a clinical diagnosis of Alzheimer’s can differ from a pathological diagnosis in that an autopsy of the brain is performed after death to see if there are actual signs of the disease such as plaques and tangles in the brain. Participants in loneliness study are part of a broader National Institutes of Health-funded study on aging.

Wilson also said loneliness differs from social isolation in that people feel alone whether they are actually alone or not.
Researchers noted that the level of loneliness didn’t vary much during the study.

While it might be tough to find ways to make people feel less lonely, Wilson said, the findings suggest another mechanism in the brain or the body might be responsible for, or contribute to, the development of Alzheimer’s disease than what is currently known. That could open up new areas for research, he said.

Alzheimer’s disease, a progressive brain disorder that gradually destroys a person’s memory, thinking and ability to carry out daily activities, affects an estimated 4.5 million Americans, according to the Alzheimer’s Association.

The study was funded by grants from the National Institute on Aging, a unit of the National Institutes of Health and the Illinois Department of Public Health.

By Jennifer Corbett Dooren, Dow Jones Newswires

US Prosecutors Start Playing Grand Jury Tapes In Libby Trial February 5, 2007

WASHINGTON (AP)–Prosecutors at the CIA leak trial on Monday started playing audiotapes of I. Lewis Libby’s grand jury testimony, a key piece of evidence against Vice President Dick Cheney’s former chief of staff.

It was the first time the trial jurors had heard Libby’s voice.

On the taped grand jury testimony, Special Counsel Patrick Fitzgerald began by asking Libby to spell his name and asking if he has a nickname.

“Scooter,” Libby replied.

Asked to explain, Libby joked, “Are we classified in here?” and then said that in the South where he is from, such a nickname is “less uncommon than it is up here.”

Fitzgerald reminded Libby that a person who doesn’t tell the truth in front of a grand jury can be charged with perjury. Libby said he understood.

“I am” prepared to proceed, Libby said.

The tapes, which will be publicly released and broadcast once the trial jury finishes hearing them, form the basis for three of the five criminal charges against Libby, who is accused of perjury, obstruction and lying to the FBI.

Libby is charged with lying about how he learned of the CIA identity of the wife of Bush administration critic Joseph Wilson and what he told reporters about it.

Portions of the obstruction charge as well as both perjury charges deal with the ex-White House aide’s alleged lies to the grand jury.

Libby’s alleged lies in his 2004 grand jury testimony concern his conversations with NBC News reporter Tim Russert, New York Times reporter Judith Miller and Time magazine reporter Matt Cooper.

Prosecutors plan to play a number of hours of Libby’s grand jury testimony for jurors. He made lengthy grand jury appearances on March 5 and March 24, 2004.

It is unusual for the government to make such extensive use of a defendant’s audiotaped grand jury testimony. The federal government did so 17 years ago in another high-profile criminal case in Washington, D.C., the drug trial of Washington, D.C., Mayor Marion Barry.