PRX Dinner Meeting Economy, Politics & Regulations December 6, 2009 Ross Korves

1. PRX Dinner Meeting Economy, Politics & Regulations December 6, 2009 Ross Korves Economic Policy Analyst ProExporter Network rosskorves@msn.com 847-722-9643

2. Policy CurrentsPresident Obama needs a big policy victory now Too many big initiatives without closure $1.4 trillion budget deficit grabbed attention Government spending costs/benefits Tax increases inevitable ?Is health care the big victory?Financial regulatory reform is next – is that it?Carbon cap-and-trade in Spring? Appropriations bill left hangingHigh unemployment compared to “stimulus” promisesPresident must rediscover the “sweet spot” between hope and reality

3. Health Care - Where From Here? Regardless of what is passed in 2009, the policy debate will continue in 2010 Final plan will be a net addition to government spending Expansion in Medicaid - how much & who pays No mandate to buy health insurance Language against rationing care Electronic insurance exchange of some type Public option of some type Federal regulation of health insurance Limited changes in Medicare

4. Financial Regulatory Reform Biggest dropped ball Fannie and Freddie still on life supports Small/regional bank failures continuing Regulatory efforts stalled by status quo Big banks have more economic power than ever Salaries at big banks a side show Bernanke pushing reforms to divert heat Bruising “insider” political fight to come over control House vs. Senate vs. Whitehouse vs. regulatory agencies vs. bankers vs. Wall Street vs. middle America It won’t be better, but it will be done – less uncertainty!

5. Federal Reserve Bernanke Senate confirmation hearing Audit legislation in House and Senate Role of regional banks Regulator or not? When and how to unwind market involvement Interest rates Value of the dollar

6. The Biggest Economic Policy Issue Lending to entrepreneurs is the economic issue of our time and the key to job creation, economic growth and tax revenue for governments Need new financial intermediaries to connect savers and borrowers Low interest rates penalize savers Banks lending less for loans perceived as more risky How do we connect entrepreneurs and savers?

7. Copenhagen UNFCCC goals last summer: Industrial countries reduce GHGs Major developing countries limit growth of emissions Transfer money/technology to developing countries Who will manage the money? Now: emissions reductions by 2020 and cash for developing countries President going on December 9th, Nobel prize on the 10th 17 percent reduction in GHG emissions by 2020 No comment about funding developing countries An agreement and everyone smiles while contemplating when the next big meeting will be held

8. Kerry-Graham Global warming is real Reduce dependency on foreign oil Nuclear power as core component of electricity production Clean coal Additional on-shore and off-shore oil & gas exploration Border tax on products from countries without standards Protect businesses and consumers from higher prices Ceiling and floor on cost of emission allowances National security issue EPA will regulate Go to Copenhagen and get others on board

9. Cap and Trade – The Deal! Kerry-Lieberman-Graham H.R. 2454 without many of the micro-managing regulations and expansions of government control, less government spending More nuclear, more clean coal, more on-shore and off-shore drilling for petroleum and natural gas Cap on price of emissions allowances Maybe no renewable electricity standard – big deal for cellulosic ethanol Outline by January 15, details by end of February

10. Other Policy Issues RFS2 Proposed Rule Time running out on January 1, 2010 start Ethanol E15 blends Decision delayed to mid-summer Positive letter from EPA to Growth Energy DOE tests ongoing, more vehicles need to finish testing 14 more vehicles done by mid-May If positive results continue, E15 looks good for vehicles made in 2001 and after (85 percent of all vehicles) If problems develop, need to reassess Beginning work on labeling program