-
-
The Economy Is Righting, but Does Congress Get It?
-
The great thing about being a pessimist is that something awful may still happen tomorrow. There are still plenty of pessimists about the economy, saying that we are spending our way into perdition; that the Great Reckoning is just around the corner, unless we do draconian things.However on Wall Street, there is hopefulness — even optimism. The stock market is up, the housing market is showing real life and corporate confidence has increased since the Congress delayed action on the fiscal cliff through a bit of old-fashioned give-and-take. Some economists are saying encouraging things, so are the business magazines.There is evidence that the economy, which was heeling badly, is beginning to right. The U.S. economy, still the economic lungs of the world, is breathing easier.Sure, there was a slight dip in performance in the last quarter, reflecting primarily reduced defense spending. It's a hard lesson for the political right to grasp: You can't extrapolate family financial rectitude into national policy, as they like to do. If a family spends more than it is earning, it simply has to cut expenditures. If it doesn’t, the end is known; credit dries up and horrors, like foreclosure, are at hand. Likewise, corporations cut costs, lay off employees and sell assets until the balance sheet recovers.When a family gets into trouble, it doesn't reduce its income by cutting luxuries, it reduces its spending. When a corporation cuts back, it tries to reduce staff not customers.But governments can worsen the situation when they tackle spending at the wrong time. If they cut expenditures too aggressively and too fast, revenues fall, unemployment rises and demands on the public purse grow. Unlike individuals and corporations, governments can’t walk away from their messes.Witness the recessions in Britain, Ireland, Spain and the total catastrophe in Greece. Irresponsible austerity has compounded the results of earlier promiscuous spending. Strong medicine has sent the patient to intensive care.Amy Kremer, head of the Tea Party Express, and many conservative members of Congress playing the pessimist’s card, like to say, and they say it often, “revenue is not the problem, spending is.”If only it were that simple. The problem is many things, including the global recession, the aging population, the high cost of medicine, two wars, badly timed tax cuts, China’s undervalued currency and the balance of payments deficit.Take your pick. The miracle is that the economy is as vigorous as it is.Already it has to deal with the tax increases that came with the budget deal in early January, particularly the increase in the payroll tax, which takes out of the economy money that would normally be spent — the large proportion of the tax which if left in the hands of the salaried class would be disposable. This may be about as much of a hit as it can take at present.But the pessimists, who believe that spending is the mortal sin of our age, want to let sequestration — a 10 percent across the board cut — happen on March 2. The Washington Post says there is no mood in Congress to compromise. But if there is no compromise, the effects could be more devastating than a simple cut in spending. The result, instead, will be a cut in program expenditures while the government’s overhead in salaries and fixed costs will eat up the budget.Austerity has been a disaster for Britain, Ireland and Spain. Do we want to follow the Europeans down that path?The pessimists, who also believe that borrowing is the original sin of politicians, would let this recovery falter through their belief that the government must be starved. Sequestration will starve it, alright. Trouble is we'll all go hungry. There’s pessimism for you. – For the Hearst-New York Times Syndicate
- no responses
-
-
-
The Fuel Revolution that Is Changing the World — And Us
-
Colorless, odorless natural gas is changing the world geopolitically and economically in ways undreamed of even five years ago.
It is a giant upheaval of which President Obama is both the beneficiary and the victim. He benefits because low natural gas prices are helping consumers and industry. And he is undermined by them because the cheap gas is savaging his dreams of “green” energy alternatives with scads of jobs attached.
The technologies which have brought on the gas boom also are contributing to enhanced oil production in the United States. Who would have believed that North Dakota would become the third-largest oil-producing state?
But the price of gas, now at historical lows, is also a political difficulty for Obama. His energy policy has been based on the old reality of shortage and a need for “alternatives.” In the administration’s scheme of things, the slack was to be taken up by the renewable sources ofenergy, wind, solar and wave power. With natural gas in plentiful supply and pushing out coal and new nuclear, the president is saddled with his failed attempts to push alternatives and to create a plethora of “green” jobs.
Yet without the boost that oil and natural gas are giving to the economy, it would be in worse shape than it already is.
A similar natural resources boom in the North Sea greatly aided Margaret Thatcher’s government and has underwritten Britain’s economy to this day, when production and British prosperity are both in decline.
New technology has brought the gas boom to the world and with it a change in geopolitics, soothing some tensions and exacerbating others.
The biggest excitement is in the Eastern Mediterranean, where there have been huge discoveries of gas — and sometimes oil and gas — off the coasts of Egypt, Israel, Lebanon, and around the Island of Cyprus.
The problems reflect the old tensions of the regions and some new ones, such as the growing estrangement between Israel and Turkey and the projection of Russian interests in the region.
Cyprus, itself a divided island since the Turkish invasion of 1974, is the closest member of the European Union to chaotic Syria and is being courted on several fronts by Russia.
Russia is worried about new gas supplies affecting its monopoly in gas supply in Europe, as well as the future of its naval base in Syria. As a result, Russia is pouring money and people (150,000) into Cyprus to keep its options in the Mediterranean open.
Cyprus would like to become a transshipment point for Israeli gas (when a gas liquefaction plant is built). But claim to reserves in its own territorial waters are being contested by Turkey and the Turkish Cypriots. About 63 percent of the island is controlled by 900,000 Greek Cypriots who claim to speak for the whole island.
With new gas everywhere, there will be a rush to find markets. Europe, for example, is hoping to ease its Russian gas dependence by building pipelines that will bring gas from Central Asia through Turkey avoiding Russia. Others, like Qatar, are looking away from Europe and to Asia for new customers.
The appeal of gas to electric utilities everywhere is undeniable. It burns with about half the greenhouse effluent than oil and coal. The power plants are easily sited, do not need huge cooling structures and the capital cost is low.
However, methane, which makes up 75 percent of natural gas, is a serious greenhouse contributor and needs to be kept out of the environment. The other components of natural gas are ethane, 15 percent, and butane and propane come in at about 5 percent each. Natural gas is the world’s most abundant compound.
While the case against the swing to gas is primarily environmental, there is an economic concern about costs in the decades to come. The environmental case is twofold:
• One, that although it produces less CO2, a principal greenhouse gas, than coal or oil, it still produces half as much as they do.
• Two, that hydraulic fracturing, known as “fracking” affects groundwater, uses too much water itself in the process and may stimulate earthquakes.
Yet the chances of the world or the United States turning away from this new bounty are nil.
If the 19th century belonged to coal and the 20the century to oil, it looks as though the 21st will be the natural gas century. Reports of the death of fossil fuels are wildly exaggerated. — For the Hearst-New York Times Syndicate
- no responses
-
President Obama’s Troubles
May 20th, 2013
Guests Brian Kelly, U.S. News & World Report; Olivier Knox, Yahoo! News; Joe Davidson, The Washington Post
The Future of Drones
May 13th, 2013
Guests Claude Salhani, journalist and Amitai Etzioni, The George Washington University
Europe; its Problems and its Promise
May 6th, 2013
Guests Annette Heuser, Executive Director, Bertelsmann Foundation; Darren Gersh, Journalist; Arnaud de Borchgrave, Center for Strategic and International Studies
What’s Ado in Washington
April 29th, 2013
Guests Joe Madison, SiriusXM Radio
A Discussion of the Anti-terrorism College at the National Defense University
April 22nd, 2013
Guests Michael Bell and Sebastian Gorka, College of International Security Affairs, National Defense University