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Verle Sutton

Ironically, today was a spectacular day for the Democratic Party.  Party leaders may never admit this or fully understand it, but this defeat in the bluest of blue states has provided them with a second chance. Today, the party is being  forced to face the truth; the majority of Americans have a visceral hatred for the type of heath care plans both houses of Congress have passed.  In fact, for many Americans, health care is so crucial that it is the issue that will decide their vote.

 If Senator Kennedy had not died, there would have been no special election in Massachusetts, and the health care bill would very likely have been passed. That would have been lights out for the Democratic Party.  It would have been crushed in November 2010 and 2012. The Democratic leadership will, if it has an ounce of intuition, take a big step back and try to regain the confidence of the American people. It worked for Clinton in 1994, and it might work again this time. 

Our Weekly Feature article offers great ideas for health care legislation, but the philosophy expressed is pretty much the opposite of President Obama’s, so I suppose a really good health care bill is still not in our future. There is some good news however, in that he bill that is ultimately passed will be less damaging than the pending House and Senate bills.

The following three minute video clip of a Massachusetts focus group is very interesting.

http://www.youtube.com/watch?v=T67ZaUinlS4

Mr. Goldhill’s interest in the U.S. health care system was stimulated by a personal tragedy when his father died unnecessarily of a hospital-borne infection.  The article was printed in the prestigious Atlantic Journal.  The magazine can be blamed for selecting such a provocative title, “How American Health Care Killed My Father.” The title is unfortunate and not reflective of Goldhill’s primary message.

We have, in Reel Time and this Blog, expressed frustration over both the content of the current health care bill working its way through Congress and with the fraudulent deal-making that has accompanied it.  Our criticisms, however, should not be interpreted as support for health care status quo.  David Goldhill does a great job of analyzing why health care costs are so high and what we can do about it.  I don’t agree with everything in this report. For example, Goldhill does not address costly lawsuits and other legal issues that have greatly impacted medical costs.  Nevertheless, we can all learn a lot from this report, How American Health Care Killed My Father.

Demand has increased substantially in recent years due to pressures exerted by environmental organizations to include recycled fiber in grades for which it is not well-suited.  These “environmental” initiatives are costly and harmful to the environment, but they are good fund-raisers for Greenpeace, Forest Ethics, etc.  The irrefutable logic of the argument that “adding recycled fiber to value-added grades is harmful”  has been ignored by most environmental organizations, universities, and politicians.  At the same time this artificial demand for recycled fiber was being created, there were a number of new paper machines being installed around the world that had no other option but recycled fiber. In a nutshell, demand has grown a great deal.

In regard to supply, production of the high volume grades has been in steep decline.  In North America, newsprint has fallen by more than 50% (eight million tons) this decade.  Shipments of uncoated free sheet have declined nearly 40% (six million tons) and shipments of coated and SC-A grades have fallen more than three  million tons. Obviously, with consumption falling, the amount of paper available to be recovered has declined proportionately.

Many paper-related forecasts are difficult, but this one was a no-brainer. For a number of years our forecast has been for  waste paper prices to move up strongly and then continue to cycle between expensive and very expensive.  With demand growing and supply falling, high prices are the only possible outcome.  

It is true that prices for waste paper collapsed when the economic crisis began, but that was an aberration.  Waste paper inventories in China were enormous in Q4/08 when the financial crisis hit, and demand tanked.  Finished newsprint inventories in all of Asia were also very high.  As the following graph points out, wastepaper prices plummeted straight down before bottoming in Q1/09.  Prices then began moving up in Q/2 as inventories were gradually worked down.  Sorted office paper (SOP) prices are already approaching former highs (these prices also relate to the current high cost of pulp).  ONP (old newspapers) is already higher than it was at any time prior to 2007, but is still well off 2008 highs.  This surge in waste paper pricing has occurred in spite of the fact that worldwide paper demand is still weak.  See graph of prices in the following PDF, Waste Paper Prices.

This is a review for Reel Time subscribers, but the key takeaway is that demand for recycled fiber will exceed supply over the long-term future.  Prices will not return to the low levels of the 90’s, except possibly during short-term periods of economic crisis.  Waste paper prices will cycle up and down, and will relate to pulp prices.  Paper mills that require recycled fiber will generally operate at a competitive (fiber cost) disadvantage.

This short report is the first of a three-part series.  In Part two we will discuss the impact of high waste paper prices on the Chinese newsprint industry, and in Part three, we will touch on trade implications.

Now, only 14 months later, another historic election might be in store for Massachusetts and the nation. Is is hard to believe, but Ted Kennedy’s vacant Senate seat is a toss-up going into Tuesday’s election. The fact that Republicans have a chance to win this seat is, no doubt, a reflection of the unhappiness Massachusetts voters feel toward the pending health care bill.  This is all the more interesting in that Massachusetts was one of the states that had been voted special medicare privileges. The problem the Democrats have in Massachusetts is not just the health care bill, of course, they did not choose a very good candidate, either. Nevertheless, if the health care bill were not an issue, Martha Coakley would be an easy winner.

I thought the following campaign ad was very well done.

At the time, I did not share my professors’ anti-MD sentiments. I believed PHD vs. MD envy played a role in their perspective.  Over the years, however, I noticed over and over again that the poorest examples of scholarship seemed to emanate from studies carried out by MD’s.

Mistakes Were Made, is an excellent book by Tarvis and Aronson; published in 2007.  One chapter reviewed the failed theory of repressed memories. This theory resulted in the destruction of many families, and even the incarceration of innocent people. It was the Psychiatric community that discovered repressed memories, promoted the theory as fact, failed to study the theory scientifically, neglected to provide appropriate peer review, and upheld this myth in the face of severe external criticism. I don’t have time to get into the details here, but it is a fascinating saga. The authors of Mistakes Were Made were much less kind to these MD’s than even my professors were. A key reason for this tragedy was that, “…most psychiatrists , who have medical degrees, learn about medicine and medication, but they rarely learn much about the scientific method, or even about basic research …”

With that introduction behind us, we can consider whether being uninsured is a health risk.  In December of 2009, five Harvard MD’s published a report, Health Insurance and Mortality in U.S. Adults,  where they concluded that the absence of health insurance resulted in the deaths of nearly 45,000 people a year in the US.  This report has been broadly quoted and used as evidence in support of the health care bill. The authors came to their conclusion by monitoring the death rates of a group of insured compared to a group of uninsured, over a nine-year period. The American Thinker did a story on this study, and titled it How Four Deaths Became 401, 309. The story is short, but statistical.

The study is about as poorly designed as is possible and not straightforward. However, according to the American Thinker review of the study, the bottom line is this – out of 9,005 uninsured in the study, 351 died during the nine-year period. This was roughly 4 more people than died in the comparable “insured” group. The authors of the Harvard study then interpolated out over the entire population to turn those four additional deaths into nearly 45,000 per year and over 400,000 over nine years.

However, the study did not control for accidental deaths, violent deaths, suicide, drug use or abuse, etc. Considering that behaviors leading to “non-medical” deaths would be at least somewhat more common among the uninsured group, it is very surprising that only 4 more people died in this group. Actually, a more appropriate outcome of the study would be to question whether health insurance in actually unhealthy – leading to unnecessary procedures that cause more harm than good.

Whether the Harvard doctors are under educated or biased isn’t known, but their study results are misleading and have no value.

I take exception to some of Dr. Heinrich’s views when he ventures off of forestry, but the man does know his trees. Several excerpts from the report follow, but click on the link in the previous paragraph – the full three pages is well worth reading.

Regarding the tenuous life span of our friends in the forest, he writes…

Part of the problem is the public misunderstanding of how forests and carbon relate. Trees are often called a “carbon sink” — implying that they will sop up carbon from the atmosphere for all eternity. This is not true: the carbon they take up when they are alive is released after they die, whether from natural causes or by the hand of man.

Dr. Heinrich points out how tree planting can be harmful to the ecosystem, depending on the species and climate. 

A forest is an ecosystem. It is not something planted. A forest grows on its own. There are many kinds of forests that will grow practically anywhere, each under its own special local conditions. When a tree falls, the race is on immediately to replace it. In the forests I study, there so many seeds and seedlings that if a square foot of ground space opens up, more than a hundred trees of many different species compete to grow there…

In addition, the tree planting emphasis in  the Kyoto agreement actually resulted in forest destruction.

…After much political wrangling, the Kyoto delegates decided that there would be no carbon-reduction credits for saving existing forests. Since planting new trees does get one credits, Kyoto actually created a rationale for clear-cutting old growth……what was originally intended as a mechanism for slowing global warming has created huge economic pressure for ecocide. And there will be no objections from easily duped bleeding- heart “environmentalists,” who absolutely love tree planting because it sounds so “green.”

There are also has harsh words for carbon offsets and those who claim that these offsets make a positive contribution to the environment.

Dr. Heinrich really does get to the truth about tress – truths that we seldom hear discussed in mainstream media.

If we were able to travel back to the 50′s, we would find that single parents were not greatly more prevalent among the poor than among the middle and higher economic groups. Society has changed greatly since then, however. Today, there are many more single parents in all economic strata, but the percentage is much higher among the poor. Government policies may not be primarily responsible for this negative evolution, but government policies did contribute to the problem. For example, one of the many Great Society failures was ADC (aid to dependent children). The intent of the program was admirable. The children of single, and poor parents (almost always women), should have help so that the basic needs of  their children could be met. The problem was that the aid stopped when a Father or partner was added to the household. This discouraged marriage and encouraged children out-of-wedlock.

Today, the elderly widows and widowers that meet playing bingo and would like to marry, often can not afford to. Widows that have not worked enough to earn full social security benefits, often receive much higher benefits based on social security credits earned by their deceased husband. However, if they re-marry, these benefits are greatly reduced. As a result, we have a number of elderly couples who are reluctantly cohabitating.

I am not sure if the income tax marriage penalty still exists but it did for most of my working life. I remember reading of a couple that  regularly divorced at year-end and then remarried shortly after, in order to reduce their tax bill.

The latest anti-marriage attack can be found in the House version of the health care bill. This excerpt comes from Phyllis Schlafly, by way of Michelle Malkin’s Blog.

Here is the cost in the House bill for an unmarried couple who each earn $25,000 a year (total: $50,000). When they both buy health insurance (which will be mandatory), the combined premiums they pay will be capped at $3,076 a year.

But if the couple gets married and has the same combined income of $50,000, they will pay annual premiums up to a cap of $5,160 a year. That means they have to fork over a marriage penalty of $2,084.

The marriage penalty is the result of the fact that government subsidies for buying health insurance are pegged to the federal poverty guidelines. Couples that remain unmarried are rewarded with a separate health care subsidy for each income.

When the Wall Street Journal reporter quizzed the Democratic authors of the health-care bill, they made it clear that this differential was deliberate. The staffer justified the discriminatory treatment because “you have to decide what your goals are.”

Indeed, the Democrats have decided what their goals are. They know that 70 percent of unmarried women voted for Obama in 2008, and the Democrats plan to reward this group with health insurance subsidies.

The final version of the Health Care Bill may change, but this is what the House thinks of marriage. Senator Baucus divorced recently, by the way, so I guess we will get no help from him.

This is what we do. First, we need that $10 billion/year back from the government. They can’t take that money away now. We can assure Congress, however, that unlike the black liquor subsidy, this new plan would save the entire pulp and paper industry and guarantee to increase employment! Surely, our representatives would not turn down such an opportunity.

Once we have the $10 billion lined up, the rest will be easy. It is so wonderfully simple. All we have to do is use subsidy funds to buy up enough pulp and paper to keep all the markets balanced. This “extra” demand would allow all mill operations to run full - thus saving every mill job and the multiple of support jobs that revolve around the pulp and paper industry.

This program would actually cost much less than you might imagine. The U.S. has a total pulp and paper capacity of roughly 100 million tons (this includes market pulp plus all paper grades - industrial as well as printing).  Although demand is trending down in many of these grades, the demand shortfall will be less than 10% in virtually every year. Even during the current severe recession, total 2009 demand for market pulp and paper fell only 11 to 12%. Such a drastic decline in demand is not likely to be repeated. Besides, a little cushion would be built into the budget anyway. Even if the plan administrator needed to buy 10% of all pulp and paper capacity (10 million tons) to keep all markets in balance, that would total (with an average cost estimate of $700/ton) only $7 billion. Such a large purchase will rarely be necessary so the program should maintain an average surplus of $4-5 billion a year.

But there is more. Not only does this plan save jobs, it also helps us save the planet from catastrophic global warming… and allows the program to profit in other ways. If you appreciate windmills, solar panels, and ethanol, you’re going to love this. The program will have up to 10 million tons/year of fiber (pulp and paper) to find a home for. This excess supply could not be sold to traditional end uses, of course, but that is not a problem. As you know, environmentalists have done an about-face during the last decade on the use of fiber for fuel. The U.S. government is now subsidizing wood-burning power generation plants. Burning fiber for fuel is both renewable and carbon neutral.

Are you beginning to see the potential here? The program would have access to as much as 10 million tons of renewable, carbon neutral, fuel.  But the plan administrator would not just sell this fiber for its fuel value, of course. That would be wasteful. First, carbon offsets would be sold to a carbon exchange so that a variety of environmentally sophisticated customers, such as magazine and catalog publishers, can help save the world.

It would be a beautiful thing. The program would be paid a great deal of money for these carbon offsets. Then, the program administrator could also sell the fiber “fuel” to utilities that are required by law to generate a percentage of electricity from renewable energy sources. It would be perfect timing. A few years ago all this excess paper would have been worth very little, but legislation has created both a market for carbon offsets, and a market for this special fuel.

Hopefully the U.S. government could be convinced to funnel the three sources of revenue (the unused funds from the $10 billion/year subsidy, carbon offset proceeds, and income from fiber sales to utilities) into a “sustainability” fund. Within five to ten years the sustainability fund would be expected to grow to the degree that we would no longer need the annual government funds. In addition, the increased size of the fund would enable the program to continue in the future, no matter how far secular demand for paper falls. The greater the decline in paper demand from traditional sources, the more fiber that could be used to generate clean, planet-saving fuel.

This proposal may not be perfect, but most will acknowledge that it is far superior to the energy bills that Congress has been writing. I have hope that it will prove to be a great success. Who knows, perhaps someday I might even receive a call from the judges that select Nobel prize winners in economics. I understand that these Nobel judges are not all that discriminating.

We are not offering the following cold weather stories as proof that global warming is a myth, but they are interesting. If climate was as sensitive to atmospheric carbon as the theory claims, then over time, we should see higher temperature highs and higher lows on a more-or-less routine basis.  And weather patterns should not revert to colder periods of 20-30 years ago. (AP Photo, Ben Czerwinski)

In early January of 2009 the canals in the Netherlands froze hard for the first time in 12 years. It was big news at the time. Skate purchases raised the GDP of the country a half point or so – well that part is not really true. Now, in early 2010 the canals are frozen again, but it doesn’t seem to be as much fun this year. The weather in Europe is actually not fun or funny, as stories from The Guardian in England ( Food Costs To Soar As Big Freeze Deepens )  and Al Jazeera  ( Severe Snow Causes Chaos in Europe ) point out. The first of these stories suggest that the winter in England is colder than any in the last 30 years, and the second claims that this could be the coldest European winter in 100 years.

Meanwhile in the U.S., AccuWeather Agricultural Meteorologist Dale Mohler, predicts that the hard freeze tonight in Florida will be the worst since December of 1989. Mohler expects a 6 to 10 percent loss of the total 2009 orange crop after tonight’s freeze.

While perusing the weather news, I also ran across an interesting survey of meteorologists. It seems that 50% disagree with the IPCC (the United Nations Intergovernmental Panel on Climate Change), 25% are neutral and 25% agree. About 33% called the IPCC conclusions not just wrong, but a scam. On the other hand, all Climate Modelers, as opposed to Meteorologists, are convinced that Global Warming is a threat - otherwise they would be out of work.