LOS ANGELES - Nuclear power has all but died in the United States, the victim of cheap oil, high construction costs and the accident at Three Mile Island. But according to Paul Joskow, director of the Center for Energy and Environmental Policy Research at MIT, the nuclear industry has a fighting chance to become part of the solution for global warming.
"With natural gas prices in the stratosphere and utilities facing the prospect of caps on carbon dioxide emissions from coal and gas-fired plants, the owners of existing nuclear plants are lining up to apply for 20-year extensions of their operating permits," he writes. "And while the choice of nuclear over the alternatives is still far short of a slam dunk (thanks to high construction costs along with regulatory and electricity marketing uncertainties), the pressure to contain United States carbon emissions may prove the decisive factor."
Also in this issue, Leonard Burman, director of the Tax Policy Center in Washington, explores the unintended consequences of a tax designed to collect modest amounts of payments from the handful of millionaires who paid none. "On first look, the AMT may seem simple and fair," Burman explains. "But for reasons nobody imagined when it was created, the AMT bull's eye hangs not on folks with Cayman Islands bank accounts, but upper-middle-income families with lots of kids who happen to live in high-tax states. And it doesn′t just raise their taxes," he writes. "It plagues them with mind-numbing complexity."
Don't hold your breath waiting for a fix. "Many options could improve on the present law. All, however, present political challenges, and some would sharply cut revenues -- even as federal spending obligations begin to balloon with the retirement of the baby boomers."
Other highlights from the new Review:
- Georgina Santos, a transportation economist at Oxford University, takes a close look at the initiatives in London and Singapore to use market forces to tame traffic congestion. Congestion pricing works, she concludes. "The question now is whether other urban leaders will muster the arguments and the political will to break through reflexive public resistance to paying for what they regard as a free good."
- Greg Rushford, the editor of an online newsletter that analyzes the politics of international trade and finance, recounts the story of trade laws gone wrong — and how some Louisiana shrimp fisherman who can't compete with their counterparts in Vietnam and Thailand, have landed on their feet. "The lessons for the struggling American shrimp industry seem clear: "Instead of resisting globalization, embrace it," he writes. "There is a lot of money to be made by Cajuns who can add value to imported shrimp with Louisiana-style cooking and recipes."
- Diana Farrell and Susan Lund of the McKinsey Global Institute, weigh the progress of Latin American development through the lens of "financial depth." "Most countries in Latin America have made serious strides toward reforming their economies in the last 15 years," they explain. "Yet despite these reforms, the financial systems in Latin America remain small relative to the size of the economies. And this reality, we would argue, weakens the region′s prospects for sustainable growth."
- Philip Martin, an economist at the University of California (Davis), sees the rapidly changing wine industry as a metaphor for the risks and rewards of globalization. "Wine probably offers a glimpse of the global economy′s future," he writes. "And, interestingly, it is not a bad vision for what Americans seem to do best. But it also offers a warning to those with faith in American particularity. The technology that has buttressed the rise of American wine is easily exportable — indeed, it is being exported, even to France. By the same token, the entrepreneurial spirit that led California winemakers to think big is surely not an American monopoly."
- Allan Shampine and Hal Sider, economists at Lexecon, the Chicago-based consultants, examine the impact of the fiber-optic cable bubble of the late 1990s. "Generally, such busts and subsequent consolidations have been precursors to even greater growth, rather than the beginning of long-term decline for the industries in question," they explain. "But there are some important differences between the recent fiber optic boom and its predecessors. Specifically, the fiber-optic frenzy has left many carriers with overlapping routes and networks, which could have a longer-term effect on the industry than earlier infrastructure bubbles."
- Ross DeVol and Armen Bedroussian of the Milken Institute estimate the incredible economic cost of chronic disease in America. "In sharp contrast to the routine miracles brought by a vibrant economy," they write, "the country still faces a harsh reality: the personal misery and financial losses associated with avoidable chronic illness are high and growing rapidly. This failure to contain the containable is undermining prospects for extending health insurance coverage and for coping with the medical costs of an aging population without breaking the budget." The article summarizes the conclusions of a report recently released by the Institute.
The Milken Institute Review is sent quarterly to the world's leading business and financial executives, senior policy makers and journalists. Its editor is Peter Passell, former economics columnist for The New York Times.