Mamdani

The past 50 years of globalization has created the largest income and wealth gap in history and no where is this more evident than New York City. New York has the greatest disparities in income of any major U.S. city, with the top 1 percent of the population getting 44 percent of the income in the city. That New York City has extreme wealth and extreme poverty, and lots of both, seems like a law of nature, older than the subway or the Brooklyn Bridge. When this happens, it is only a matter of time before some charismatic populist comes along with a promise to redistribute the wealth and Zohran Mamdani, the newly elected mayor of New York is just such a person. He is 34 years old and has been a state representative for 5 years. He has no business experience and will be responsible for the $112 billion dollar city budget. How was he able to achieve this is based on the old proven policy of taking from the rich and giving to the not rich. His platform is free city buses, rent freeze, free child care, increase minimum wage, city owned grocery stores and affordable housing. This will be paid for by raising $9 billion in new income taxes on the wealthy and business. This is the classic democratic policy which is pejoratively referred to as tax and spend. He also has promised to set aside $65 million for government funded gender surgeries, using mental health workers to respond to some police calls, reduce the jail population by closing Rikers Island, decriminalizing prostitution and certain misdemeanors, reforming the police department by reducing its scope and cutting overtime and provide housing for migrants. New York City has enough rich people so he can continue these policies for many years but in time, as is always the case with redistribution, you eventually run out of money.

Amazon

Many marveled at the speed with which Elon Musk built his latest data center in Memphis but not to be out done, Amazon recently completed a new center in Indiana in thirteen months from start to finish. Amazon has opened a data center on 1,200 acres of land in Indiana that’s dedicated to training and running models from Anthropic. They will not be using Nvidia chips like most other data centers. The first 7 buildings are completed and operational. The buildings are over 200,000 sq ft and there will be 23 more buildings in the next two years. The complex will use 2.2 GW.s of energy, the equivalent of two large nuclear powered plants. This is as much power as half the people in the state use. The power will come from Indiana- Michigan power company. Amazon is a major customer and is paying for the necessary substations to be built on-site, which helps the utility modernize the power grid to handle the increased load. These will be natural gas plants. Amazon will pay 80% of the cost of upgrades and sign a 12-year contract for usage. Amazon is also paying to upgrade the water treatment plant, the waste water plant and roads and highways leading into and away from the project. The state has offered a 50% real property tax abatement for 10 years and the remaining 50% will be enough to offset the additional cost the city will face in local services. On the surface this looks like a win-win for the state and Amazon.

Revolving door

Eisenhower warned against the power of the military-industrial complex and when Obama took office he declared and end to the revolving door between people who worked in the defense department and the defense industry. He said that anyone working for him would have to wait two years after leaving government before working in private industry. After he was elected and before he was inaugurated, he broke his rule. Willian Lynn who was a lobbyist for Raytheon and he had previously worked in the Clinton defense department where he was in charge of budgets and acquisitions before he took his job at Raytheon. Obama hired Lynn and three years later he left to work to return to private industry where he worked as a CEO making $10 million per year. This sort of thing happens on a regular basis in all administrations. A GAO report in 2021 showed that 28 of the 32 generals and admirals that retired went to work in private industry as lobbyist or consultants.

Future power

Large nuclear power plants (one gigawatt) cost about $4 billion outside the US and about twice that in the US. Much of this is regulatory and is currently being addressed as nuclear makes a comeback. The cost of subsidies for wind and solar 2010–2023: Cumulative costs for solar and wind subsidies were $76 billion and $65 billion, respectively Inflation Reduction Act (IRA) projections: The 10-year cost of wind and solar tax credits is projected to be around $421 billion between 2025 and 2034 Add to that the subsidies for EV’s Projections for the total cost of energy/clean vehicle subsidies under these acts range from an estimated $391 billion over 10 years (per the CBO) to up to $1.2 trillion (per Goldman Sachs' 2023 projection) This does not include the environmental cost of mining, processing and disposal of the materials needed to make windmills, solar panels and EV’s. Then the human cost of boys working in cobalt mines in Africa, Indians in Peru watching their land being destroyed by lithium mining and ground water contamination in China mining rare earths. Moving away from fossil fuels is necessary to reduce carbon but also because these materials will run out. Scientist realize more each day that nuclear power is the answer.

Rent of buy

Many young couples are comparing buying a home vs renting a home. The average home in Hastings cost $330,000 and is 2,100 sq ft in size. For a conventional loan this means 3% down or $9,900. The monthly payment on a 7%, 25-year loan is $2,263 for principal and interest. Include $2,600 for property tax, $1,500 for home owners’ insurance and $140 for mortgage protection insurance for a total monthly payment of $2,744. The average rent for a three-bedroom home is $2,100. For a home owner the cost of interest, taxes and insurance is deductible and saves about 20% in federal and state income tax. This brings the monthly net payment down from $2,744 to $2,195. At the end of the first year the house has gone up in value by 3% which is $9,900 in unrealized profit. This offsets the down payment. Most young people should save for a down payment as the long-term benefit increases as the property value increases. Over time the value of housing has increased 3% per year. The law allows gift money to be used as down payment. The question for grandparents is, would you rather give your grandchild $10,000 for a down payment on a home while you’re living or give them $10,000 in your will after your dead.

Nuclear is coming

The government announced this week plans to invest $80 billion along with $100 billion from Japan to build Westinghouse nuclear reactors. This will include large one-gigawatt reactors plus small modular reactors. Two AP1000 reactors were deployed and are now operating in Waynesville, GA. The plants produce 4.5 gigawatts. The plans include building SMR the AP300. There will be a total of 10 large reactors and a number o small modular reactors to be under construction by 2030. The reactors will use small uranium pellets as fuel. The US +government will take a 20% ownership in the project meaning that approvals will be fast tracked. The projects could be completed in five years meaning sometime in the 2030’s. While this is going on private companies are setting up to build small reactors to power data centers. Nuclear is on the way to replacing fossil fuels and the goal of carbon free by 2050 may be possible.

Carbon free

England set a goal of being carbon free by 2050 and the result is the country who started the industrial revolution is de industrializing. The main reason is the high cost of energy. For hundreds of years England maintained its industrial position by using coal but that ended with climate change. Today the price of electricity in England is 38 cents per kWh while in the US the cost is 18 cents or less than half. In England the cost of natural gas is $49 per 1000 cubic feet and in the US the cost is $25. The UK was the first country to industrialize, but also one of the first to deindustrialize. UK manufacturing as a share of GDP has fallen from 30% in 1970 to 8% in 2024 The US was headed in this direction up until ten years ago when the country realized that wind and solar could not replace fossil fuels. The next step is to understand that nuclear is the answer. The same thing is going on in other European countries like Germany.