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Wednesday, April 11, 2018

Global Heat Budget #1: Anthropogenic Heat

I have been away from my blogs for far too long.  I will try to post a series on the global heat budget.

Previously, I posted a lot of work on atmospheric CO2, considering the geographic distribution, isotope data, rates of change, comparison to man-made emissions from various sources, and interaction of the atmosphere with global carbon reservoirs.  The latest summary post is here:
I deliberately avoided the question of climate change to focus on the science of atmospheric CO2.

For the past year, I’ve been studying on the problem of global warming (the first-order consequence of greenhouse gases) and climate change (the higher-order consequences of greenhouse gases).  And I’ve been posting less while I worked to understand the data.

I’m going to present what I’ve learned as a series of short posts, rather than writing a book.
The very short version is this:

The Global Heat Budget; The Very Short Version
People have raised the concentration of atmospheric CO2 by burning fossil fuels.  The volume of CO2 released by fossil fuels has increased sharply since about 1950, and continues to increase today.

CO2 and other greenhouse gases retain heat in the atmosphere.  The quantity of heat is easily calculated as a function of the concentration of CO2 in the air.  We can calculate the amount of heat that has been trapped to date, and we can forecast the heat that will be trapped in the future.

Heat is increasing in heat sinks on earth.  Observations show that the amount of heat appearing in earth’s heat sinks is approximately equal to the heat retained by greenhouse gases.  The heat is showing up as rising ocean temperatures, melting ice, and a warmer atmosphere.  The quantity of heat appearing in these systems has been measured by high-accuracy monitoring programs since about 2003.  The warming ocean accounts for about 95 percent of our estimates of anthropogenic heat.  Retained heat due to greenhouse gases is the only credible source for the heat appearing in heat sinks.

Sea-level is rising.  Sea level rise has been documented by tidal gauges for 130 years, and by high-accuracy satellite measurements since 1992.  The amount of sea level rise matches the observed volumes of melted ice, thermal expansion of the ocean, and ground-water extraction.  The fact of rising sea level confirms observations of melting ice and warming oceans.

Higher atmospheric CO2 concentrations are inevitable for the foreseeable future.  Quantitative forecasts of future heating indicate serious and expensive problems will develop for the nation & the world.
Atmospheric CO2 has risen as a consequence of fossil fuel emissions.
History of Study of CO2 as a Greenhouse Gas
The physics of CO2 as a greenhouse gas is settled science, based on published studies dating back over 150 years.  High accuracy programs to measure melting ice, ocean temperatures, and rising sea level have been in place in recent decades, long enough to yield conclusive results.

Carbon dioxide was first proved to be a greenhouse gas by John Tyndall in 1859, proving speculation that began in 1820.  The planet-wide effect of changing CO2 concentrations was calculated by the Swedish chemist Arrhenius and published in 1896.  Arrhenius was originally attempting to find the cause of the ice ages, but later recognized the possibility that fossil fuel emissions could change the climate, and published that result in 1906.  Quantitative measurements of CO2 and rising temperatures were published in 1938 by Guy Callendar.  Systematic global measurements of CO2 concentrations began in 1955 by Charles Keeling.  Satellite measurements of sea level rise began in 1992.  Satellite measurements of Antarctic and Greenland ice mass began in 2003.  Detailed, comprehensive and continuous measurements of ocean temperatures began in 2004.

Calculation of Heat Retained by Greenhouse Gases
Greenhouse gases are mostly transparent to wavelengths of visible light, which carry most of the energy from our sun.  Visible light strikes the earth, is converted to heat.  Normally, some portion of that energy is re-radiated into space as thermal infrared radiation.  But greenhouse gases are opaque to infrared wavelengths, and trap heat in the atmosphere as a function of the concentration of those gases.  As greenhouse gases have accumulated in the atmosphere, lower levels of the atmosphere have warmed.  Higher levels of the atmosphere have cooled, as more heat has been trapped near the surface.

NOAA publishes historical tables of the atmospheric heating coefficients (known by the awkward and uninformative phrase *radiative forcing*) for anthropogenic greenhouse gases, dating back to 1979.  The coefficients are prepared according to international standards, taking into account cloudiness and angle of solar incidence to yield a global average.  You can do the math yourself to calculate annual heat retained by each greenhouse gas, which I have done.  Carbon dioxide represents about two-thirds of the heat retained in the atmosphere by greenhouse gases.  Methane, nitrogen oxide, chlorofluorocarbons (CFCs) and minor greenhouse gases account for the rest of the heat retained by greenhouse gases. 
In 1979, greenhouse gases retained about 7 x 1021 joules.  By 2016, greenhouse gases retained about 1.2 x 1022 joules, an increase of 78% in annual heating.  It’s difficult to conceptualize how much heat is represented by 1022 joules.  A joule is about ¼ of a standard calorie – the heat required to raise a gram of water by one degree C.  It’s a small amount of heat.  But 12,000,000,000,000,000,000,000 joules is a lot of heat.  Later in this series, we’ll consider how the earth can absorb that quantity of heat, and where the heat is going.
Aerosols and Anthropogenic Cooling
Aerosols are the least-well quantified anthropogenic influence on earth’s climate.  Sulfate aerosols cool the atmosphere by making clouds more abundant and reflective.  Sulfates can originate from volcanic eruptions, but are also a common industrial pollutant.  Carbon black aerosols warm the atmosphere by absorbing sunlight. 

Sulfate emissions have dropped dramatically in the United States and Europe over the past 25 years, thanks to regulations intended to limit acid rain, but world-wide sulfate emissions have continued to grow.  The average global impact of sulfates and black carbon aerosols is shown in the following graphs, but the more significant impacts are regional.  South Asia suffers from the greatest carbon black emissions and impact, while China is now the source of most sulfate emissions.

IPCC Net Anthropogenic Heating and Cooling
The IPCC (International Panel on Climate Change) 5th Climate Assessment contains a table of anthropogenic heating and cooling coefficients.  The IPCC numbers for conventional greenhouse gases are identical to NOAA, but IPCC also recognizes other anthropogenic factors, which can both heat and cool the atmosphere.  These factors act by direct absorption of sunlight, or by a greenhouse effect that is restricted to certain levels in the atmosphere.  The IPCC recognizes the warming factors of tropospheric ozone (O3), stratospheric water vapor (H2O), black carbon on snow, and contrails.   IPCC recognizes cooling factors, including land-use changes (which affect the reflectivity of the earth), stratospheric ozone, and aerosols. 

Here is a chart based on IPCC data, showing anthropogenic heating and cooling coefficients (*radiative forcing*).

Primary Anthropogenic and Other Heat
Strangely, to me, the IPCC report makes no mention of another source of anthropogenic heat – the primary heat resulting from burning fossil fuels and nuclear plants, and secondarily, the primary heat resulting from deforestation.  The global heat from non-renewable sources is reported in the BP Statistical Review of World Energy.  The energy released by deforestation can be easily calculated from the volumes of carbon dioxide released, which is estimated in several sources.  These sources of heat represent about 5% and 1%, respectively, of the net anthropogenic heat reported by IPCC, and exceed several other minor sources of heat in the report.

Here is a chart showing the calculated anthropogenic heating and cooling, based on IPCC estimates for radiative forcing, plus heat from primary energy.
I considered and calculated the incremental accumulation of geothermal heat, due to the retention of heat by greenhouse gases.  Geothermal heat is normally in a steady state, with heat flux from the planet balanced by thermal radiation into space.  The quantity of heat retained is quite small, however, and not worth adding to the heat budget. 

Agriculture has a significant influence on the planet’s seasonal CO2 cycles, due to the preponderance of agriculture in the temperate Northern Hemisphere.  Changes in atmospheric CO2 necessarily imply changes in heat, through the reduction and oxidation of carbon.  Agriculture appears to be a zero-sum influence on the long-term heat budget but may be significant in seasonal climate modeling. 

Net Anthropogenic Heat
The net heating coefficient (*radiative forcing*) for all anthropogenic heating and cooling was about 2.4 watts/min 2011.  The global average for solar insolation at the top of the atmosphere is 1361 watts/m2.  About 1000 watts/mof the sun's radiation reaches the earth's surface.  Anthropogenic heat represents a small but noticeable increment to the natural heating of the earth by the sun, about 0.24% above the natural, steady state of solar heating and radiative cooling.

Using the IPCC heating and cooling numbers, plus primary heat, we see that net global anthropogenic heating was 9.8 x 1021  joules in 2011, the latest year for which heating and cooling data are available. 

That’s enough heat to melt about 29,500 gigatonnes of ice, or to bring 14,000 gigatonnes of water from room temperature to boiling.  Of course, the icecaps are much larger than 29,500 gigatonnes of ice, and the ocean is much larger than 14,000 gigatonnes of water.  So the changes we see are subtle.  In the next post few posts, we will look at how anthropogenic heat is being distributed in earth’s heat sinks.  
NOAA Radiative Forcing Tables

IPCC climate change references
31 page Summary

VOX article on BECCS (Bio-energy and Carbon Capture and Sequestration) requirement to keep temperatures less than 2 degrees higher than pre-industrial levels.

2013 Full IPCC report, 1500+ pages

Fourth National Climate Assessment

BP Statistical Review of World Energy
Primary Heat from Fossil Fuels and Nuclear Energy

Primary Heat from Deforestation
Primary heat calculated from CO2 released.
Houghton, R.A. 2008. Carbon Flux to the Atmosphere from Land-Use Changes: 1850-2005. In TRENDS: A Compendium of Data on Global Change. Carbon Dioxide Information Analysis Center, Oak Ridge National Laboratory, U.S. Department of Energy, Oak Ridge, Tenn., U.S.A.

IPCC 5th Climate Assessment, pg. 1446.

Aerosols caused by human activity play a profound and complex role in the climate system through radiative effects in the atmosphere and on snow and ice surfaces and through effects on cloud formation and properties. The combined forcing of aerosol–radiation and aerosol–cloud interactions is negative (cooling) over the industrial era, offsetting a substantial part of greenhouse gas forcing, which is currently the predominant human contribution. The magnitude of this offset, globally averaged, has declined in recent decades, despite increasing trends in aerosol emissions or abundances in some regions. (emphasis mine).

By nucleating a larger number of smaller cloud drops, aerosols affect cloud radiative forcing in various ways. (A) Buffering in nonprecipitating clouds. The smaller drops evaporate faster and cause more mixing of ambient air into the cloud top, which further enhances evaporation. (B) Strong cooling. Pristine cloud cover breaks up by losing water to rain that further cleanses the air in a positive feedback loop. Aerosols suppressing precipitation prevent the breakup. (C) Larger and longer-lasting cirrus clouds. By delaying precipitation, aerosols can invigorate deep convective clouds and cause colder cloud tops that emit less thermal radiation. The smaller ice particles induced by the pollution aerosols precipitate more slowly from the anvils. This can cause larger and longer-lasting cirrus clouds, with opposite effects in the thermal and solar radiation. The net effect depends on the relative magnitudes.

Sunday, February 25, 2018

Arctic Drilling, Climate Change, and Dependence on Fossil Fuels

My cousin asked me to write a blog post about proposed drilling for oil in the Arctic National Wildlife Refuge.  As part of the Republican-led tax reform bill, Congress recently overturned a decades-old ban on drilling in the area, largely at the insistence of Alaska Senator Lisa Murkowski.  Alaska will share in the leasing and production tax revenues from oil development within the refuge.  ANWR is on Alaska’s North Slope, and covers about 30,000 square miles (a little bigger than Massachusetts, New Hampshire and Vermont combined).  The refuge is coastal plain adjacent to the Arctic Ocean, and mountainous to the south.  Most of the coastal plain was recognized as prospective for oil in the 1970s, and set aside by Congress as “Area 1002” in 1980 for a future decision on drilling.  Area 1002 covers about 2350 square miles (about twice the size of Rhode Island). 
Image Credit: Alaska Department of Natural Resources

Some issues are not simple.  Decisions regarding fossil fuels are that kind of issue.  To make these decisions, we have to look at both sides of the coin.

Fossil-Fuel Dependence
First, let’s consider our use of fossil fuels.  As you are reading this, the computer screen in front of you is made from oil.  The energy powering the computer was probably produced by burning natural gas or coal.  Everything you possess, everything you can touch, every stick of your house is either made from oil or was certainly transported by oil.  Most of the food you eat was produced on farms which use tractors powered by oil to plough and harvest.  You probably use oil to travel to work, and you are certainly supported in life by others who use oil for their daily lives, which enables them to make your clothes, transport your food, build your houses, sell you things, and so on.  If oil suddenly ceased to exist, most of the population on earth would not be able to live.  We are all connected, and together we are dependent on fossil fuels.  If you are breathing, you can thank an oil company.

That’s the status quo. 

Climate Change
The other side of the coin is that continued use of fossil fuels will cause great destruction unless mitigated by some costly and unproven technology.  There is no question that climate change is occurring, is accelerating, and is caused primarily by man-made emissions of CO2.  Forecasts for any scenario without removing CO2 from the atmosphere show an increase of average global temperatures between 3 and 8 degrees Celsius (from 1900).  The mid-range of these forecasts would greatly impair agriculture in the United States, and flood coastal communities and barrier islands within 150 years.  Natural disasters will become more frequent.  Food production from the ocean may fail.  The higher end of these forecasts is likely to render swaths of the planet uninhabitable, due to complete agricultural failure, heat extremes, or flooding.  Countries likely to be affected most are those near +30 and -30 degrees of latitude (due to atmospheric convection cells), including Australia, South Africa, Mexico, the southwest United States, Spain, Italy, Israel, Jordan, Syria, Iran, Iraq, Pakistan, India, Bangladesh and southern China.  It is worth noting the number of nuclear-armed countries on the list, particularly in South Asia.

Heating will continue even if all fossil-fuel use stopped today, because of the compounding effect of CO2 already in the atmosphere.

Renewable Energy Growth Limits
Renewable energy is currently about 3.5% of global energy supply.  
Data Source: BP Statistical Review of World Energy

Globally, renewable energy is growing at a rate of about 14% per year, while overall energy use is rising at 1% per year.  As a purely mathematical exercise, we could completely replace fossil fuels by the year 2044, if renewable energy continued to grow at the rate of 14% per year.
But there are limits to the growth of renewable energy, too.  Starting from a base of 3%, it is fairly easy to construct the next 0.4% of the global energy supply in a single year.  Starting from a base of 50%, it will be very hard to replace 7% of the global energy supply in a single year.  Massive new mines will have to be constructed to supply the rare-earth elements needed for wind turbines and lithium for batteries.  New factories will be needed to construct solar panels. Steel & aluminum will be needed for transmission.  And mostly, a massive amount of money will be needed for capital investment.  As a summary judgment, this cannot happen by mid-century.

We therefore need to research and implement CO2 capture & sequestration technologies or mitigation technologies as soon as possible.

Energy Security
The United States consumes about 20% of the world’s energy, with about 4% of the world’s population.  As this blog has noted before, the use of so much energy is largely responsible for America’s high productivity and wealth, (

American oil production peaked at 10.2 million barrels in 1970, as predicted by M. King Hubbert in 1956.  The development of horizontal drilling & fracking technology made large volumes of unconventional resources economically viable, invalidating Hubbert’s assumptions.  The decline in US production reversed dramatically in 2008 due to shale-oil production.  Shale oil now accounts for 6.5 million barrels per day – about two-thirds of American production, and still growing.  The United States is expected to pass the 1970 peak sometime this year and become the world’s leading oil producer in 2019. 
U.S. oil production has grown from 5 million barrels a day to 10 million barrels a day since 2008 as a result of shale-oil fracking.  Petroleum demand has fallen from near 20 million barrels a day to about 13.5 million barrels a day thanks to greater efficiency in energy usage.  The U.S. still has a supply deficit of about 3.5 million barrels a day.

Nevertheless, economic growth has pushed American oil consumption to over 20 million barrels per day.  The level of our dependence on foreign oil is a little difficult to quantify, because we are importing 10 million barrels of crude oil per day, refining the oil, and re-exporting 6.5 million barrels per day, mostly as refined product.  That leaves us with a net deficit of about 3.5 million barrels per day, most of which can be supplied from Canada, a relatively safe supplier. 

U.S. Oil Imports by Country, 1000s of Barrels per Day
Saudi Arabia
United Kingdom
Bahama Islands
United Arab Emirates
Trinidad and Tobago

Nevertheless, the United States is vulnerable to supply disruptions or embargos in the event of an international crisis or war.  We would no longer be able to supply the buyers of our refined petroleum products, which would cripple our customers’ economy, and by connection, our own. 

 The United States has a strategic oil reserve of about 725 million barrels, but even this reserve would last only 100 to 200 days if all sources of foreign oil were cut off.  In the event of a conflict, military demand would clearly take priority in the use of the strategic reserve.  An extended conflict could leave the country with insufficient oil for the economy, for trade with potential allies, and for military use. 

Where Will You Get Your Oil?
As I noted in the beginning of this post, oil is still necessary for the transportation of all goods, the manufacture of most goods, the raw materials and energy for manufacturing, the production and transportation of food, and the energy and materials for construction.  We can’t yet live without oil. 

Solar and wind renewable energy sources currently account for about 3% of the global energy supply.  Those sources are growing at 14% per year, but even in the most aggressive renewable energy scenarios, the global economy will remain dependent on oil for decades.

Many people object to various sources of oil.  People protest fracking of oil shale.  People protest offshore oil production (which is generally safer than oil transportation by tankers).  People protest the use of oil sands.  People protest Arctic Ocean drilling.  People protest oil pipelines (which are safer than oil transportation by rail). 

Those who protest any particular oil project should answer the question: if not here, where will you get your oil?

Foreign oil production is often conducted less responsibly in terms of the environment than production in America.  There is weaker environmental oversight, more flaring of gas, and more frequent transportation accidents.  Foreign purchases of oil transfer large amounts of wealth to foreign interests who may use that wealth directly against us.  Major exporters of oil include Islamic autocracies, Russia, Venezuela, and other countries who oppose the United States.  These sources may also be subject to an embargo in the event of a conflict.

I’ve been tempted to make a simple game for this question.  The player is asked “Where will you get your oil?” and must choose between options.  It is not possible to leave the game, and necessary to choose sufficient options to meet the country’s economic and security needs.  It would look something like this:
Where Will You Get America's Oil?
All values in millions of barrels per day.  Twenty million barrels per day are required.  “Available” barrels are probably available for use or import.  I assume that no additional barrels are available from conventional fields in the lower 48 onshore, or Gulf of Mexico offshore. The “Current” column represents America’s current oil supply mix.
Conventional Onshore Oil
Offshore Gulf of Mexico Oil
Offshore Florida, California or East Coast
Arctic Oil
Shale Oil Fracking
Canadian Oil Sands
Islamic Country Imports
Russian & former Soviet Imports
South American, Unstable Country Imports
African Imports
European & S. Asian Imports
So, spend a moment and choose where you will get America’s oil.  It is necessary for all of the things that you use in a normal day, and also necessary for all of the people who provide you with things and services.  

Policy Recommendations
I favor drilling in the Arctic National Wildlife Refuge and the (ANWR) National Petroleum Reserve in Alaska (NPRA).  The volumes of oil which might be produced from these areas is uncertain, but they have the potential to add one or two million barrels of oil a day to American production.  This would materially increase the nation’s energy security, reduce the money paid to America’s geopolitical opponents. 

The USGS mean resource estimate for ANWR 1002 area is 7.7 billion barrels of oil. Volumes of gas were not explicitly estimated, but are undoubtedly large.  The mean resource estimate for NPRA is 8.7 million barrels and 25 TCF.  The apparent specificity of the numbers is an illusion.  There is an order-of-magnitude uncertainty in these numbers, but there is strong potential for large volumes of production.

Exploration of ANWR will take more than a decade.  The process will involve the acquisition of seismic images of the subsurface, processing and interpretation of the data, a leasing process to establish the right to drill, exploratory drilling, and design of development & production facilities.  All of these activities will be regulated to minimize impacts on the environment.   Most activities will be conducted only in winter when the ground is deep-frozen, to avoid impact on tundra wetlands. 

I do not favor drilling in the waters of the Arctic Ocean.  An oil spill on land is relatively easy to clean up, compared to an oil spill in Arctic waters. 

Conclusion and Carbon Tax
The decision whether to drill for Arctic oil requires balancing our current dependence on oil with the impending disaster due to climate change, with consideration for whatever alternative sources of oil exist.

Our economic dependence on oil requires that we continue to drill and produce oil at the present time, while we develop renewable energy sources and technologies as quickly as we can.  In my opinion, it is not wise or effective to block individual petroleum projects on a one-off basis.  Every one of us is still dependent on oil, and we are supported in every aspect of our lives by others who are dependent on oil.  Each decision to prohibit an oil development project necessarily is a decision to obtain oil somewhere else.  Often those alternatives are environmentally less responsible, and counter to the security and fundamental of the United States.

I believe a steep carbon tax is the most effective incentive to rapidly develop renewable energy without causing debilitating economic disruption.  I favor a carbon tax rather than cap-and-trade schemes, because of the relative simplicity of a tax system compared to the difficulty of ensuring compliance under cap-and-trade.  But I realize the any measures to control carbon emissions will be difficult, especially in the United States.  A carbon tax will be politically unpalatable and possibly impossible in a democracy.  A carbon tax will also hurt poor people disproportionally.  But if we proceed with Arctic drilling to ensure America’s energy security, it should be accompanied by measures like a carbon tax which will reduce total carbon emissions. 

ANWR resource estimates.
NPRA resource estimates.

Limit on surface development in ANWR is 2000 acres.
Revenue from oil leasing (and production royalty) would be split evenly between the US and Alaska.

Tuesday, December 12, 2017

Corporate Taxes and the 2017 Republican Tax Reform Plan

The Republican-controlled Congress is in the final stages of writing the most sweeping tax changes in forty years.  The Senate version of the tax bill is 487 pages, which is hardly the sweeping simplification promised by Republicans, and too long to easily summarize in this paragraph.  Business taxes are affected far more than individual taxes. Specifics of the tax bill are summarized at the end of this article.

The main focus of the tax reform is lower taxes for corporations.  The pretext is that lower taxes on corporations will result in economic growth, but the real goal is to lower taxes on unearned income.  Profits saved through lower taxes will flow through corporations to shareholders, including Republican Party donors.  The expectation of higher dividends and capital gains has driven the stock market by more than 25% since the election.

Most, if not all, serious economic reviews of the tax plan do not support the expectation of higher economic growth.  The Congressional Joint Committee on Taxation concluded that the bill would only add marginally to economic growth, while adding one trillion dollars to the US Federal debt, even after accounting for the additional tax revenue resulting from growth.  And both private and JCT analyses conclude that tax benefits will accrue to the wealthiest Americans, with poorer Americans losing money.
Justification for 2017 Corporate Tax Cut
The rationale for the deep cut in corporate taxes is based on the idea that higher after-tax profits for corporations will result in a higher rate of economic growth.  Also, the argument is that a higher rate of growth will be shared by wage-earners in the form of higher take-home pay.
Let’s look at that idea.

United States Corporate Taxes Compared to the OECD
In justifying the corporate tax cut, both of Alaska's Senators have said that American corporate taxes are "among the highest in the world".  They believe those high taxes render our corporations noncompetitive in global markets. As this blog has previously noted, a quick trip to the OECD database shows that idea is simply false.  Although US nominal corporate taxes are comparatively high, the corporate tax actually paid in the United States is less than the average for the OECD.   
GDP Growth, Corporate Taxes, After-Tax Profits and Wages
The premise that higher after-tax corporate profits lead to higher economic growth and higher wages is false.  American economic growth has been declining since World War II.
This is especially evident when we look at non-recessionary periods.  This chart has deleted all quarters with negative GDP growth.
Wages have declined since World War II, as a share of gross domestic income, GDI (or similarly, GDP).
Let's look at Corporate After-Tax Profits.  We can see that profits have soared since the 1980s as a share of GDP.  Higher corporate profits since 2004 (excepting the recession year) have not produced higher GDP growth, or higher wages.
Corporate taxes have also fallen as a percent of GDP, coincident with a falling rate of growth.
But the rise in After-Tax Profits has not resulted in a higher rate of economic growth, or higher wages for workers.  The argument that lower taxes will result in higher economic growth appears to be void.
Tax Cuts and the Reagan Economy
The final argument for tax cuts is that tax cuts worked in the past.  The basis for that claim is generally in the mythology surrounding tax cuts enacted in 1981 and 1987 during the Reagan administration.  Close examination proves that economic growth during the Reagan administration was not extraordinary, and the growth that did occur was largely due to other factors. The actual performance of those tax cuts is complicated by eleven tax hikes that were also passed during the Reagan years, for the purpose of restoring lost revenues.

Let’s look at the Reagan economy.
First, the “economic boom” of the Reagan years looks less spectacular when viewed in the context of the total post-war economy.  American economic growth has been falling steadily since World War II, part of a general structural problem in the U.S. economy, reflected in GDP growth, wages as a share of the economy, and the time required for recovery after recessions.  [That should be the topic of another blog post.]  There were really only two years during the Reagan administration that had economic growth above the long-term, non-recessionary trend (1983 and 1984). 
Still, the Reagan administration was marked by a period of fairly persistent and strong growth.  There are three reasons for that growth. 
1)      Interest Rates
I believe that the main reason for sustained growth during the Reagan years was falling interest rates.  Interest rates reached a singular, extraordinary peak in 1981 (see chart).  The Volcker Federal reserve had largely quelled inflation by 1981, and began to let interest rates fall.  The extraordinarily high interest rates at the peak probably caused the multiple recessions of 1980 – 1982.  As interest rates fell, economic growth which had been bottled up by high rates was released.  I believe the influence of falling rates far exceeded the influence of lower taxes.
2)      Serendipity
Secondly, there is simply the matter of good timing.  The Reagan administration was faced with recessions in 1981 and 1982, but afterwards enjoyed the benefit of the typical eight-to-ten year business cycle.  There is no particular policy which can be attributed to this aspect of success, except luck.  [See previous chart, with indicated recessions.
3)      Tax Cuts
Tax cuts do provide stimulus to the economy, and the Reagan tax cuts of 1981 were appropriately given during an economic recession.  Ultimately, though, tax cuts are literally borrowing against the future, and must someday be paid back in terms of later economic growth.  I believe that it is best to run budgetary surpluses when there is strength in the economy, to allow the government the ability to incur deficits when the economy is weak, without fear of destabilizing the economy.  The Reagan administration never fully funded the government to pay for the deficits it incurred.

The 2017 Republican Tax Reform Plan
The Republican Tax Plan passed by the House and the Senate must now be reconciled into a single bill.  The bills are very similar in scope, and the process should not result in significant changes to the plans, except where major errors are discovered in the assumptions and provisions of the bill. 

My main objections to the plan are as follows:
1)      Debt
The plan runs large federal deficits, at a time when the total Federal debt is approaching 100% of annual GDP, and interest payments are starting to become a significant part of annual spending.
2)      Timing
The plan cuts taxes at a time of full employment, when fiscal policy should be to run surpluses.  
3)      Corporate Taxes
The plan awards long-term tax relief to corporations, at a time when corporate taxes are already low; corporate earnings are already soaring, and no gains in GDP have been observed.  
4)      Lack of Middle-Class Tax Relief/Benefits for Unearned Income
Individual tax relief in the plan will accrue mostly to high income families, particularly those with unearned income.  The corporate tax reduction will flow through to investors, much more directly than to wage-earners.  The plan will not result in long-term tax relief for wage-earners, whose share of gross domestic income has been falling for 47 years.
5)      Abolishes ACA Individual Mandate
The tax plan eliminates the individual mandate aspect of the Affordable Care Act.  It is considered an important facet of the act, in encouraging younger people to participate in the insurance pool.  

The Republican tax plan is based on false ideas:  that American corporate taxes are higher than other countries; that higher corporate taxes produce higher economic growth and higher wages; that general tax cuts during the Reagan administration produced extraordinary growth.  All of these ideas can be demonstrated to be false, using economic data that is available to anyone.

Lower corporate taxes increased profits, not wages.

The Republican tax plan will probably become law.  I expect that it is unlikely to survive the next administration and Congress.  But the debts incurred before it is overturned will last for a generation.

A copy of this post is available on my political blog,
Summary of Important Changes in the Republican Tax Reform Bill
Business Tax Changes
1) Drops the nominal corporate income tax rate from 35% to 20%.  The current Senate bill, perhaps through an oversight, keeps the minimum corporate tax at 20%, eliminating exemptions by default.  It is expected that the reconciliation bill will restore those exemptions, dropping the actual corporate rate below 20%.
2) The tax rate for “pass-through” small businesses is reduced, excepting service businesses such as lawyers, accountants, and doctors.  The amount of the reduction is to be determined in reconciliation.
3)  Rules for expensing, rather than capitalizing, spending are relaxed, allowing quicker realization of tax benefits from business investment.
4)  Repatriated profits from foreign operations would be taxed at a much lower rate than US profits.  Cash assets would be taxed at 10% (Senate) or 14% (House), while non-cash assets would be taxed at 5% (Senate) or 7.5% (House). 

Individual Tax Changes
5) All classes of individual taxpayers will see a tax reduction in the near term, but those reductions will expire in ten years.  On the other hand, business tax reductions will be permanent.
6) The standard deduction is doubled, but personal exemptions are eliminated.  Child tax credits are increased, but the full value is only available to those with higher income to offset taxes.  For large families, the child tax credit may not fully offset the loss of personal exemptions.
7)  State & local tax deductions are eliminated; casualty loss deductions are eliminated.  The mortgage interest deduction is retained for all but the largest mortgages.
8) The estate tax may be eliminated, or the minimum threshold for the estate tax may be doubled.
9)  The individual mandate tax of the ACA is repealed.  Some fear that this will destabilize the insurance markets, by removing a large number of younger, healthy individuals from the insurance pool.
10) The fate of the Alternative Minimum Tax will be determined in reconciliation.
11) Waived tuition, common for graduate students, will now be taxed.  Colleges with very large endowments will have some earnings taxed.

12) Drilling will be allowed in the Arctic National Wildlife Refuge Area 1002, which was originally set aside for consideration for oil development.
Appendix 2

As this blog has previously noted, American Federal taxes are among the lowest in the world, in direct contrast to Republican claims that American taxes are among the highest in the world.  Here is data from OECD and the World Bank, showing the relative ranking of American Federal taxes compared to other countries.  

United States Federal taxes as a share of GDP, compared to 34 OECD countries.
United States Federal taxes compared to 123 other countries; data from World Bank.
Countries with lower Federal taxes than the United States are Ethiopia, Pakistan, India, Afghanistan, Bangladesh, Central African Republic, West Bank and Gaza, Lithuania, Oman, Nigeria, Bahrain, Estonia, United Arab Emirates.
Summaries of the Republican Tax Plan
Washington Post

Economic Reviews of the Tax Plan
Tax Policy Center – the plan will ultimately raise taxes on more than half of Americans.
University of Chicago Survey – only one out of 42 economists believes that the plan will significantly grow the economy. 
University of Pennsylvanian/Wharton review – the tax plan will add about $1.3 trillion to the national debt.

This article attempts to put lipstick on a pig.  The article acknowledges that economic growth from the tax plan will be small, “but significant”.  The article recognizes that slower growth has occurred in the past two decades, when progressively slower growth has actually been going on for seven decades.  The article gives no explanation for why growth is slower now than in the past, or why tax cuts at a time of full employment will help. 

A Federal tax expert says that the tax plan is stupid.

Historical Data
OECD tax on corporate profits
US corporate tax among the lowest in the OECD

Corporate Tax as share of GDP

Source of federal revenue