Global Warming Alarmism

Kyoto might destroy the US economy and climate change might make most of the planet uninhabitable. We should ditch Kyoto and put in place something that rewards people for stabilising the climate (or mitigating its worst effects) however they do so. Kyoto, conceived in the 1990s, prejudges that reducing anthropogenic greenhouse gas emissions is the only solution. We need instead projects that will respond to our rapidly expanding knowledge. I suggest Climate Stability Bonds

Sorry, that should be Climate Stability Bonds.

Does anyone actually have a good study that looks at the economic issue in some detail and attempte to see what the net effect would be?

I have read through the standard ones and in every one that I have seen looking at the costs there is always something about ignoring benefits. And I do mean all the benefits. Will be see a healthier population because we are walking more? Will our diets change? How is innovation spured on by high energy costs taken into account?

John

I don't have a sub, John, but this is new:

---- Abstract -----

Global climate change poses a threat to the well-being of humans and other living things through impacts on ecosystem functioning, biodiversity, capital productivity, and human health. This paper briefly surveys recent research on the economics of climate change, including theoretical insights and empirical findings that offer guidance to policy makers. Section 1 frames the climate change problem and indicates the ways that economic research can address it. Section 2 describes approaches to measuring the benefits and costs associated with reducing greenhouse gas emissions. In Section 3 we discuss the implications of uncertainty for the timing and stringency of policies to address possible climate change. We then present issues related to policy design, including instrument choice (Section 4), flexibility (Section 5), and international coordination (Section 6). The final section offers general conclusions.

Best,

D

Global warming is another in a long line of doom of the world scenarios. Peak oil is another good one. Back in the 70's and 80's they said half the world would starve in ten years, then an ice age would fall. The world's oil was supposed to run out sometime around 1985. doom, doom, doom. gotta love it!

Let us see

Blood - AIDS
Frogs - Tim covered that a couple of posts ago
Gnats - Lot of sceptics about
Flies - Wouldn't have any if DDT were not banned
Disease in Livestock - Mad cow disease ring a bell
Boils - Still waiting
Hail - Can we substitute hurricanes?
Locusts - On schedule
Darkness - Global dimming
Death of Firstborn - See, Lovelock has a point.

Lovelock was wrong about CFCs, remember? -- he thought the published research would be enough to convince the world to quit producing them without government action.

Remember this?
http://nobelprize.org/chemistry/laureates/1995/b3.gif

It was just luck that the chlorine industry won out over the bromine industry when the search was on for highly stable *fluorocarbon compounds. Bromofluorocarbons were quite competitive; had they prevailed in the then marketplace, we'd have had a permanent ozone hole by the 1970s, before the science understood why. That's not my opinion, it's Paul Crutzen's, stated in his Nobel Prize speech, excerpted below.

Life turned on that flip of the coin, we lucked out.
Lovelock's never been one to cry wolf without reason.

Lovelock:
"Sherry Rowland and Mario Molina used my data in their historic Nature paper. They made public their concern about the potential of the cfcs to deplete stratospheric ozone. At first I was sceptical. I did not doubt the excellence of the science, or the validity of the hypothesis that the cfcs would accumulate and become an ever-increasing source of stratospheric chlorine. Nor did I doubt that this chlorine would react with and deplete ozone. Indeed, in 1974 I took samples of stratospheric air and was able to confirm the Rowland Molina hypothesis that the stratosphere was a sink for the cfcs. What I did doubt was that the 50 ppt of F11, and the 80 ppt of F12, in the air in the mid 1970s were, at that time, a significant threat."

Lovelock:

"It is normal in science for new hypotheses to have a hard time .... At the time, it seemed that monitoring, not a ban, was needed. Looking back, I realize I was wrong to oppose an early ban on the release of cfcs to the atmosphere. I underestimated the time needed for the international understanding that led to the Montreal agreement on the cfcs."
http://www.resurgence.org/resurgence/issues/lovelock187.htm

Crutzen, in his 1995 Nobel Prize lecture, spelled it out:

"AND THINGS COULD HAVE BEEN MUCH WORSE

"Gradually, over a period of a century or so, stratospheric ozone should recover. However, it was a close call. Had Joe Farman and his colleagues from the British Antarctic Survey not persevered in making their measurements in the harsh Antarctic environment for all those years since the International Geophysical Year 1958/1959, the discovery of the ozone hole may have been substantially delayed and there may have been far less urgency to reach international agreement on the phasing out of CFC production. There might thus have been a substantial risk that an ozone hole could also have developed in the higher latitudes of the northern hemisphere.

"Furthermore, while the establishment of an instability in the Ox-ClOx system requires chlorine activation by heterogeneous reactions on solid or supercooled liquid particles, this is not required for inorganic bromine, which is normally largely present in its activated forms due to gas phase photochemical reactions. This makes bromine on an atom to atom basis almost a hundred times more dangerous for ozone than chlorine (78, 52). This brings up the nightmarish thought that if the chemical industry had developed organobromine compounds instead of the CFCs - or alternatively, if chlorine chemistry would have run more like that of bromine - then without any preparedness, we would have been faced with a catastrophic ozone hole everywhere and at all seasons during the 1970s, probably before the atmospheric chemists had developed the necessary knowledge to identify the problem and the appropriate techniques for the necessary critical measurements.

"Noting that nobody had given any thought to the atmospheric consequences of the release of Cl or Br before 1974, I can only conclude that mankind has been extremely lucky, that Cl activation can only occur under very special circumstances. This shows that we should always be on our guard for the potential consequences of the release of new products into the environment. Continued surveillance of the composition of the stratosphere, therefore, remains a matter of high priority for many years ahead."
-- http://chem.tsinghua.edu.cn/liym/jiaoxuezhuye/liuhuadong/jingdiandaodu/….

Bonnie Horesh: We should ditch Kyoto and put in place something that rewards people for stabilising the climate (or mitigating its worst effects) however they do so. Kyoto, conceived in the 1990s, prejudges that reducing anthropogenic greenhouse gas emissions is the only solution.

Bonnie, i've seen several statements to this effect in various commentaries but I simply don;t think it's correct.

Yes, Kyoto sets targets in terms of percentages of 1990 emissions but those targets can be met through various sequestration technologies as well as by emission reductions.

Sam: You know, although all the people who have said that I would die soon have been wrong, it would be wrong of me to conclude that I would never die. I figure that everything that is capable of scaring so many people so much deserves at least a glance, don't you?

I glanced at peak oil, I became worried. It's a sobering thought that even if the most optimistic projections are true (35+ years to plateau), my son (4 months) will probably live to see all the world's crude extracted. How will we replace the 80 million barrels of oil we use every day, preferably in a way that doesn't harm the environment too much?
Can you think of a time in the past when the world as whole ran out of a so important resource? I can't.

Ian Gould

Yes, Kyoto sets targets in terms of percentages of 1990 emissions but those targets can be met through various sequestration technologies as well as by emission reductions.

Ok, I should have said net emissions. I still think we need to reward any way of stabilising the climate, or mitigating its negative impacts, rather than focusing solely on atmospheric CO2. Regards

Ronnie, look at how long it's taken to show and convince people that CO2 emissions affected the global climate. Rewarding speculative ways of "positive climate engineering" or what you may call it, seems extremely risky to me.

Thanks, Hank.

Harold, I agree and I would say that even now people are not convinced enough about CO2 to actually do much to reduce net emissions. So I'm advocating a way that will reward people for whatever they do, which might well involve reducing emissions, but could be anything else that stabilises the climate. My proposal means that the choices about what to do would be with the market, which would have powerful incentives to go for the most cost-efficient projects. Depending on the targeted goal, they might also go for projects that mitigate rather than prevent climate change. Governments would set the objective, and be the ultimate source of finance for it, but the ways of achieving it will be determined by the market.

Ronnie Horesh: I looked at your site. Your idea is interesting, and deserves to be tried in practice, but it's too new to apply to something as critical as climate change - at least if you intend to ditch the current efforts (Kyoto). To me that seems a bit like saying: "I will pay the holders of these slips of paper x$ when there is a ditch here", and then when they get out their shovels you say "What are you doing? You should sell your shovels! These slips of paper will cause the ditch to be dug!". If your idea works like it at best could, I think the bond-holders would use not only Kyoto, but much stronger emission reductions.

I'm a non-scientist, science aficionado. There's already been some interesting things here. Two points.

1) First things first. In order to effectively deal with GW isn't it important that the U.S. reach a consensus there's a potentially serious and timing-dependent problem? In other words, don't we need certain industries/companies to stop covertly manipulating our political conversation? Afterall, we're currently the biggie in CO2.

2) Is this memory correct? In the 70s the CFC industry said, "Prove it!" and for a decade science couldn't. Among the reasons was that a Nimbus[?] satellite data stream of Antarctica was being analyzed with software that had the actual ozone levels defined as out-of-range for acceptable data from the get-go.

Thanks Harald. Yes, it's very likely bondholders would implement some sort of emission reductions, at least till they found a better way of stabilising the climate. Unlike Kyoto, though, they would have incentives to seek those emission reductions that will generate most climate stabilisation per dollar spent. They wouldn't be hamstrung by politics, but could (for example) pay emitters in developing countries to install scrubbing equipment. More important, they would constantly be looking for better ways of stabilising the climate, reacting to new knowledge, conducting research etc - something that Kyoto will not bring about. Also note that a Climate Stability Bond regime could work as a supplement to Kyoto. They're not mutually exclusive. Regards

>They wouldn't be hamstrung by politics, but could (for example) pay emitters in developing countries to install scrubbing equipment.

Again, I have to point out that this is quite specifically provided for under Kyoto - see the Joint Implementation and Clean Development Mechanism sections.

Ian, you're right of course. What I should have said was: They wouldn't be hamstrung by politics, but could (for example) pay emitters in developing countries to install scrubbing equipment without jumping through a set of time-consuming hoops in order to ensure approval by an accredited 'independent entity'. My point is that under a Climate Stability Bond regime it's the outcome that matters, not procedure. Bondholders would bypass complex approval and monitoring regimes and select the projects that will give us the most climate stability per dollar spent.

In order to be confident of receiving a pay-out, stabiltiy bondholders will need to be confident that the climate will actually be stabilised.

That means invests in the billions of dollars (it also raises the issue of free riders buying bonds in the expectation that others will make the needed investment).

Raising billions of dollars from private capital markets for a highly speculative project is likely to require far more in the way of "jumping through hoops" than the CDM.

Ian: under a bond regime the billions will be paid out only if the climate is stabilised. In Kyoto, the costs are upfront, and the climate outcome (as distinct from the emissions outcome) is not only remote but uncertain. I suspect it would be easier to raise funds and enthusiasm for a profit-making venture that works to stabilise the climate, than to get countries to make real sacrifices in pursuit of emissions that may or may not do anything to stabilise the cliamte. Regards

Ronnie - you miss my point.

Under your proposed model the funds for climate stabilisation have to be raised up-front from private capital markets.

Given the uncertanty involved in when and if climate stabilization will be achieved, the potential returns from bonds will be severely discounted by capital markets.

Ian, sure. I don't claim Climate Stability Bonds are utopian. Just that they are better than Kyoto. Yes, heavy discounting means that stabilising the climate will cost a lot more than if there were certainty. Please note though: (1) that it's the market that determines the ultimate cost, and the market has incentives to go for the lowest-cost solutions. There will be competitive bidding for the bonds on their flotation that will minimise the cost to the bonds' backers (taxpayers). (2) The target definition of 'climate stability' could include or be limited to such things as 'numbers of people killed in adverse climatic events, about which there would be less uncertainty than purely climatic variables (temperature, change of temp etc).

It's not perfect, but we're talking about setting up a mechanism that will minimise costs, encourage diverse, adaptive solutions, and that will shell out only when the real objective has been achieved. Kyoto does none of these things. Kyoto means high costs, upfront, using fossilised science to get some reduction in emissions that just might impact on climate change.

So tell me Bonnie, do you favor scrapping defence spending in favor of "National Security bonds"? How abotu abolishing the police and the court system in favor of "Crime Stabilisation bonds"?

While we're at it let's scrap all public spending on health and medical research ("Life Expectancy extension bonds") andspace research ("Mars Landing Bonds").

Markets are extremely useful tools and are the solution to most of our problems, but they aren;t the solution to all of them.

Problems in which no single actor can effect the desired outcome (thereby creating free rider problems and increasing uncertainty) are one of the areas where markets tedn to fail.

There are already emchanisms to speculate on the future of the climate - betting on future weather is possible in various forus, weather futures are traded on various commodity boards.

Additional derivatives whether they be your bonds or an atmospheric CO2 contract (denominated in terms of the atmospheric concentration in say, 2020) are liekly to play a useful supplementary role in the inevitable adjustment process.

But they can't substitute for government action.

No amount of ill-informed and inaccurate polemics about the deficiencies of Kyoto will alter that.

Tim Lambert writes, "Pat Michaels says that Kyoto would destroy the US economy."

In the article he references, Pat Michaels writes, "If we implement Kyoto as our European friends want, it would cost us about 3 percent of GDP per year."

That is a very specific number. At present, 3 percent of the U.S. GDP would be about $360 billion per year. In 2001 (when the piece was written, 3 percent would have been about $300 billion. So Pat Michaels is saying that the U.S. implementing Kyoto would cost $300-$360 billion per year.

Do you disagree? If so, what is your estimate of the cost of the U.S. implementing Kyoto?

Mark, do you think that implementing Kyoto would destroy the US economy?

Mark,

I wrote a detailed response to your enquiry which got lost in a browser melt-down.

Key points: the US economy is currently worth around $12 trillion a year, 3% of $12 trillion is $360 billion.

Under Kyoto, the US was supposed to reduce its emissions by around 8% of US emissions or 480 million tons.

$360 billion is $750 per tonne of CO2 reduction.

The actual market cost of a credit for a one tonne reduction on the US market has been between roughly 8 and 18 Euros over the past year - say $10-20 per tonne.

Now I can accept that the cost of reduction credits would be significantly higher if the US were in the market - let's say double the maximum recent price or US$40 per tonne.

I can also accept that there'd be other economic losses besides the direct cost - I'm even prepared to accept that they might be as large as the direct costs (which is a highly pessimistic assumption) AND I'm prepared to ignore any economic benefits at all from the reductions.

On that basis, you get a cost per tonne of reductions of around US$80 per tonne - or slightly more than 10% of Michaels' figure.

That implies annual costs (pessimisticly) of around 0.3% of US GDP.

As it happens, in the post I lost I took a look at some figures from this paper: "http://econpapers.repec.org/paper/cwlcwldpp/1201.htm" and inferred an estimated cost of around 0.3% of GDP per year for the years 2008-2012.

Note please that Nordhaus and Boyer, the authors of that paper were opposed to US ratification.

Note to that their economic modelling was done when the price of oil and gas was significantly lower - higher energy costs reduce the net cost of shifting to other energy sources.

Ian: Climate Stability Bonds are not a "substitute for government action". Under a bond regime government would still set the goal and still be the ultimate source of finance for it. The bonds would simply channel market forces into achieving governments' targeted objective. Government is good at articulating society's wishes and at raising revenue. But all the evidence is that it's terrible at actually achieving goals. Markets in both economic theory and on all the evidence are better at allocating scarce resources to achieve prescribed ends. Climate Stability Bonds would allow government to do what it's best at, and markets to do what they are best at.

They're also more transparent as to both objective and cost than the usual government institution- and activity- based programmes. So yes, if society determines that it wants to land on Mars or reduce crime, why not a issue bonds for such purposes? Government, I repeat, would set the objective, determine how much to spend on it, and raise revenue for its achievement. Markets would allocate funding to specific programmes.

And there's no need to abolish (for example) the police. Bondholders could use their funds to supplement, focus or enhance police work, or in countries the police or corrupt, they could bypass,or otherwise undermine obstructive members of the police force.

Problems in which no single actor can effect the desired outcome (thereby creating free rider problems and increasing uncertainty) are one of the areas where markets tedn to fail.

Note please that bondholders will have incentives to cooperate with each other.

Finally, could you please try not to insult me? We were having a polite discussion and I don't need lessons in accuracy from someone who can't even get my name right.

>Markets in both economic theory and on all the evidence are better at allocating scarce resources to achieve prescribed ends.

Ronnie, I am unaware of what qualifications (if any) you have in economics but I'd have to say that based on my own knowledge of economics (a concentration area in a BA course followed by about a decade working in the field) your knowledge of economic theory is deficient.

Are you aware of the concepts of externalities; zero-sum games; the free-rider problem and the public goods? (To name a few concepts relevant to situations in which markets are not better than government at "allocating scarce resources".

If I have offended you I'm sorry. But you have previously conceded (twice IIRC and without rereading the entire discussion) that your descriptions of the Kyoto Protocol are incorrect. In a discussion on the topic of Kyoto, I'd suggest that's a more serious error than misreading "Ronnie" as "Bonnie".

Thank you Ian. However, I have to point out that you have failed to respond to my rebuttals of your significant points. You have rightly drawn attention to apparent deficiencies in Climate Stability Bonds, but you respond to my attempts at refutation by talking about Mars landings and your superior education. These are distractions. I'm obviously not as well-versed as you in the minutiae of Kyoto, but my claim that it's worse than my proposal are based primarily on its over-riding objective, not the detail. Now please, do you have any relevant comments to make on my previous post, where I pointed out that Climate Stability Bonds actually involve a very large role for government: that is, setting the objective and raising finance for it? Or what about my point that bondholders will have powerful incentives to cooperate with each other? Let's talk about these, rather than my non-encyclopaedic knowledge of Kyoto or economics. Who knows, we might generate light rather than heat.

Nice to see the detail, but I'm surprised that this hasn't been attacked yet :-
"They see it as an international instrument that would destroy the economy of their major competitor"

Surely this fellow is a supporter of capitalism? Taking a hard-headed economic viewpoint? Must know that the sentence could equally accurately read :-
"They see it as an international instrument that would destroy the economy of their major trading partner"

That'd help, wouldn't it?

I wrote, "So Pat Michaels is saying that the U.S. implementing Kyoto would cost $300-$360 billion per year.

I asked Tim Lambert, "Do you disagree? If so, what is your estimate of the cost of the U.S. implementing Kyoto?"

No answer.

Instead, this question: "Mark, do you think that implementing Kyoto would destroy the US economy?"

No, I don't think implementing Kyoto would "destroy" the U.S. economy. But who (besides yourself) has said it would?

Here is what Pat Michaels wrote,

1) "Kyoto would help wreck the economic engine that drives America forward while Europe lags behind."

2) "If we implement Kyoto as our European friends want, it would cost us about 3 percent of GDP per year. And for what? According to climate models (whose veracity is another subject), if every Kyoto signatory lived up to the Protocol, the net amount of warming prevented in the next 50 years would be 0.13ºF, an amount too small to measure."

3) "In a nutshell, thats why the European governments are so exercised about Bushs no to Kyoto. They see it as an international instrument that would destroy the economy of their major competitor, even as they know it doesnt do a thing about global temperature."

So...a person could interpret those 3 statements any way he wanted, but one logical interpretation would be that "wreck the economic engine that drives America forward while Europe lags behind" means that implementing Kyoto would bring the U.S. economic growth rates down to those of "Europe" (e.g. France and Germany).

Would that happen? Well, it would of course depend on what the U.S. implementing Kyoto would cost. I could certainly see the *possibility* that implementing Kyoto could lower U.S. GDP growth from 3% per year to 1% per year for a decade.

And Pat Michaels says that implementing Kyoto completely (even the U.S.'s commitment) would only reduce the temperature increase in 2050 by 0.13 degrees Fahrenheit.

So, again:

1) Do you agree or disagree with the assessment of the U.S. cost of implementing Kyoto at $300 to $360 billion per year? If not, what is your estimate?

2) Also, do you agree that completely implementing Kyoto (even including U.S. commitments) would lower the temperature increase by 2050 by only 0.13 degrees Fahrenheit? If not, what is your estimate there?

Ian Gould writes, "Under Kyoto, the US was supposed to reduce its emissions by around 8% of US emissions(sic) or 480 million tons."

No, under Kyoto, the US was supposed to reduce its emissions to around 8% below THE 1990 EMISSIONS LEVEL. I'm too lazy to look up what U.S. emissions were in 2001 or 2005, but in 2002, emissions were 6862 million metric tons of CO2 equivalent, which as 11.5% higher than the 6,156 metric tons of 1990.

http://www.eia.doe.gov/oiaf/1605/gg03rpt/summary/overview.html

Therefore, the total reduction to reduce to 8 percent BELOW 1990 would be about 20% (for 2002), or approximately 1.2 billion metric tons (of CO2 equivalent).

Ohhhhhh...perhaps your "480 million tons" was referring to "CARBON equivalents" rather than "CO2 equivalents"?

If so, the required reduction would be about 330 million tons of carbon equivalent.

This website...

http://www.eia.doe.gov/oiaf/kyoto/cost.html

...estimates the following cost:

Among the studies compared in Table 30, the projected carbon prices in 2010 fall into three groups. MIT, EPRI, CRA, and WEFA project prices in the range of $265 (WEFA) to $295 (CRA) per metric ton of carbon. PNNL projects carbon prices of about $221 per metric ton. EIA projects carbon prices of $348 per metric ton."

Using the lowest and highest values mentioned, the range is $221 to $348 per metric ton of carbon.

Using 330 million tons of carbon equivalent, I calculate the annual cost range at $73 billion to $110 billion.

Is that a good estimate? Who knows? I'm glad the U.S. government isn't dumb enough to try the experiment...especially since even meeting the reduction target it would have virtually no effect on temperature.

>Now please, do you have any relevant comments to make on my previous post, where I pointed out that Climate Stability Bonds actually involve a very large role for government: that is, setting the objective and raising finance for it?

Actually it probably involves a considerably larger role for government - assuming "climate stability" however defined is ever achieved.

It would require governments to agree on how to sahre the cost and would also have difficulty in convincing investors that governments would actually meet their commitments.

>Or what about my point that bondholders will have powerful incentives to cooperate with each other?

Actully they'd be more likely to have incentives to pretend to co-operate while cheating.

Consider the case of OPEC: if all OPEC emmbers keep to their quotas, oil prices are liekly to be higher than otherwise. but the optimal strategy is to promise to abide by your quota while secretly selling as much oil as possible - and there's plenty of evidence that the OPEC members do exactly that.

Now assume I held 1% of the otusiding climate stabiltiy bonds - I stand to make 1% of the total profitif the bonds pay off.

However, a 1% contribution to the stabilisation is unlikely to be decisive - I might achieve all the objectives of my proposal and still not see a cent of return. Alternately, other bondholders might achieve 100% or more of the desired
reduction in warming regardless of the failure of my project.

Under the circusmtances, like the cheating OPEC member, the rational response is to do as little as possible while encouraging others and assuring them I'm doing my bit.

Mark Banisch:

So...a person could interpret those 3 statements any way he wanted, but one logical interpretation would be that "wreck the economic engine that drives America forward while Europe lags behind" means that implementing Kyoto would bring the U.S. economic growth rates down to those of "Europe" (e.g. France and Germany).

Would that happen? Well, it would of course depend on what the U.S. implementing Kyoto would cost. I could certainly see the *possibility* that implementing Kyoto could lower U.S. GDP growth from 3% per year to 1% per year for a decade.

Mark, I hate to break it to you but per capita GDP growth in the US isn't higher than in Europe. America's higher economic growth is almsot entirely attributable to higher population growth.

Thanks Ian for your comments. You say:

[Climate Stability Bonds] would require governments to agree on how to share the cost and would also have difficulty in convincing investors that governments would actually meet their commitments.

Yes, governments would have to agree on cost-sharing. Note that this is similar to Kyoto. As to convincing investors that they will meet their commitments: you'll know that governments already issue bonds. The market discounts the small likelihood that government won't pay up. Governments could always deposit funds in escrow if non-payment were thought to be a significant problem.

Now for your further points: the defined goal could be expressed in terms of objective, verifiable, criteria. Difficult, certainly, but no more difficult that monitoring the success or otherwise of Kyoto, and it's Kyoto against which my proposal should be measured. Not, I repeat, some utopian, frictionless ideal programme.

If you hold a small fraction of the bonds consider what is likely to happen. You would be trying to be a free rider and you might succeed if your 1 per cent were the only small holding. The other holders would have strong incentives to co-operate to achieve the objective and you might be lucky. But what if 50 per cent of the bonds were held by small holders? Most likely nobody would do anything to stabilise the climate. The value of the bonds would fall, as the objective becomes more remote. Eventually they will become so cheap that would-be free riders sell up rather than risk losing more, while previously uninterested investors become interested.

I don't think your analogy with OPEC quite holds. Again, it's the objectively verifiable nature of the target that will deter cheating. Regards

"Pat Michaels says that Kyoto would destroy the US economy"

In contrast to a costly overseas war, a particularly unfavorable balance of trade incorporating a huge dependence on foreign energy sources, enormous tax breaks for enormous incomes, and record deficits for both government spending and foreign trade, all the pillars which keep the US economy so strong.