Archive for the ‘economy’ Category

My Declaration for the Fourth

July 2, 2011

Amid the cook-outs and fireworks this weekend, it is easy to forget the real reason we celebrate the Fourth of July. It is because 235 years ago the Continental Congress adopted a radical document stating that it was necessary for the 13 American colonies to severe their bonds to the British Empire in order for their inhabitants to enjoy the “unalienable rights” bestowed upon all men, namely “life, liberty, and the pursuit of happiness.”

Eventually, 56 men signed the Declaration of Independence, agreeing to “mutually pledge to each other our lives, our fortunes and our sacred honor.” It was not a hollow pledge. These were men of stature, and many of them of significant wealth. They had much to lose in attaching their names to this document. They put their status, wealth, and their very lives on the line in what was effectively treason against the Crown.

No doubt many of the delegates who signed the document did not agree with every single word in it, yet they signed it nonetheless, even though so much was at stake personally. These men from vastly different backgrounds and political inclinations banded together for a purpose that was larger than any of their individual interests.

And because these leaders were able to put their personal desires and differences aside in order to unite for a higher purpose, thousands of Americans took up their cause, leaving their homes, livelihoods and families to risk their lives fighting the most formidable army in the world in pursuit of independence. Unfortunately, we are now a long way from those days.

Today, our leaders are more inclined to make pledges that divide, instead of unite us. Politicians on the right are compelled by interest groups to pledge not to raise taxes, even to the point of maintaining inefficient tax preferences for oil, gas and ethanol and tax breaks for the wealthy. Lawmakers on the other side are pressured to pledge not to do anything that affects entitlement benefits.

The result is stalemate and inaction in addressing the budgetary challenges confronting the country. I believe that putting the U.S. on a fiscally sustainable path in a manner that enhances long-term economic growth and competitiveness is the challenge for our generation. We must recognize the moment at hand and summon the courage and cooperative spirit of our forefathers in meeting it.

Left unchecked our mounting national debt presents a dire threat that rivals that posed by any conceivable military or economic foe. Only through a bipartisan process in which both sides engage in good faith with all options on the table will we produce the appropriate response. All will find some provisions unpleasant, but we all must understand that our fiscal predicament is so grave that difficult choices and tradeoffs will be required. 

We can overcome this challenge and emerge a stronger nation, just as we have with every past ordeal that confronted us. But it will require the same spirit of shared sacrifice, cooperation, determination, and vision that we have collectively mustered in previous trials.

While this foe may not have a face, the consequence of failure certainly does. We need look no further than Greece to see the suffering and strife that can occur. While the effects in the U.S. may not be as pernicious, they will be far-reaching. Decisive action is required. The nation needs leadership now.

So, as we fire up the grill and light the fireworks, let’s also resolve to address our fiscal challenges with the same fortitude that this nation was founded on.

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Vacation and Vacating

August 22, 2010

August is a relatively calm time to reflect before the stormy months ahead. Congress is currently in recess, the president is on vacation. By contrast, the period after Labor Day will be marked with shrill posturing in Washington and heated campaigning throughout the country ahead of the November election.

I recently had my vacation with my family (and still recovering). Besides allowing me to get reacquainted with Carolina BBQ, Krystal burgers and my kids’ uncanny ability to frustrate and amaze me at the same time, it also enabled me to ponder some of the major policy events this year so far. Among them were a very unhealthy debate over health care which resulted in inadequate legislation, a deficit of bipartisanship and truth regarding the federal budget deficit and national debt, and little energy for energy and climate reform in Washington despite of the Gulf oil spill and other developments. All the while the sure-to-be-taxing debate over extending the 2001/2003 tax cuts has been put off, despite the fact that they expire at the end of the year.

Now that it appears that any real action on climate and energy policy was capped along with the BP well, I feel it important to lament the opportunity lost. While our leaders are enjoying vacation, they need to be called on how they vacated their responsibilities on this issue.   

The inability to produce any results stems, aside from the partisanship that is crippling all action in DC, from the unwillingness of policymakers to publicly acknowledge two fundamental realities:

  1. we cannot change how we produce and consume energy overnight;
  2. one way or another, we will have to pay more for energy, at least in the near term.

 Regarding the first point, many advocates of cleaner energy are unrealistic in their demands. Yes, we should have seriously begun transitioning away from fossil fuels more than thirty years ago, but we didn’t. So it will still take time to wean ourselves off of dirtier fuels. We must develop now the comprehensive energy strategy that we have failed to devise and implement for so long. But there will be a transition period between now and a cleaner energy future. A natural and realistic compromise is to expand domestic production of oil and gas in the short term in exchange for support of comprehensive energy reform in the longer term. The Gulf spill took offshore drilling off the table just when it appeared that expanded drilling would help pave the way towards such a compromise.

Secondly, those who vociferously decry that efforts to reform our energy regime will raise the cost of energy are disingenuous since energy prices are sure to rise regardless, for a variety of reasons. First of all, prices are relatively low now because of the global economic slowdown, which is inhibiting demand. Few economists doubt that gas prices will rise significantly once the economy recovers and demand increases. The problem will become exacerbated over the long run as the U.S. competes more with growing economic powers such as China and India for dwindling oil reserves. Furthermore, energy prices will also rise due to increased legal and regulatory burdens in response to recent developments, including the Gulf oil spill and the Upper Big Branch coal mine disaster in April.

The fact is that there are costs to our dependence on fossil fuel that are not reflected in the price we pay at the gas pump or in our monthly electricity bills. All too often the discussion on negative externalities is limited to climate change. This is unfortunate because, although not without merit, the climate change claims engender heated opposition and are difficult for many Americans to fully comprehend. On the other hand, external costs such as U.S. military involvement in the oil-rich Middle East, national security vulnerabilities of relying on oil from countries like Venezuela that are openly hostile to us, environmental damage such as mountaintop removal and oil slicks in the Gulf of Mexico and Alaskan coast, and the deaths of 29 miners in West Virginia and 11 workers on the Deep Horizon oil rig transcend partisan differences and are easier to appreciate.

 All this points to a basic truth that many experts recognize, but that few politicians want to face – putting a price on carbon will be essential to achieving energy reform. Accounting for the true cost of fossil energy will make alternative sources more competitive and spur conservation and efficiency measures. Market-distorting subsidies and mandates will not get us where we need to be.

Another benefit of pricing carbon is that it would help improve the country’s fiscal situation. The increased revenues from pricing carbon could significantly reduce our national debt. While opponents of a cap-and-trade program have quite successfully stalled it in Congress by labeling it as “cap and tax,” with deficits and debt a top issue for voters, such an argument could be very persuasive.

When vacation ends, hopefully also will the vacating of action.

Friday Policy Haiku — Stimulus

June 18, 2010

Congress can’t balance/

Stimulus now, debt later/

No plan, just gridlock

Friday Policy Haiku – Reform on the Street

April 23, 2010

Up against a Wall/

Street appears to be one way/

Why is reform hard?

Friday Policy Haiku – Jobs Cry

February 19, 2010

Our cries for more jobs

Washington responds with pork

Fall on deaf earmarks

The New Environment for Climate and Energy Policy

February 7, 2010

In his recent State of the Union address, President Obama signaled the administration’s new messaging and policy strategy for climate and energy. Not once did he mention “cap and trade,” instead he referred to the need for a “comprehensive energy and climate bill.”

He discussed energy and climate policy in the context of American innovation and international competition. He specifically mentioned that China, Germany and India are making investments in clean energy technology in their pursuit of knocking the U.S. off its global pedestal.

Though he backhandedly chided “those who disagree with the overwhelming scientific evidence on climate change,” he offered another rationale for supporting energy reform, stating that “the nation that leads the clean energy economy will be the nation that leads the global economy.”

The new strategy is savvy in light of the declining public enthusiasm for combating climate change and the inability so far to get legislation passed in the Senate. The economy currently is trumping concerns over the environment. So far, opponents have been able to concentrate on the cap-and-trade provisions of the bill – labeling it “cap and tax.” Cap and trade is an easy target because it is a complex mechanism that relatively few people truly understand. Rebranding enables a discussion of how energy and climate policy affects the U.S. economy and our global standing while removing a bull’s eye for opponents. Focusing on the need to reform our energy regime can appeal to a wider segment of the population and attract broader support.

Energy and climate are intrinsically linked and have serious repercussions for our economy and security. I called for comprehensive energy reform repeatedly in another forum last year.

Americans understand that our current energy system is unsustainable and threatens our security. We recognize that fossil fuels are not replenishable and that our dependence on foreign oil leaves us vulnerable to regimes that are unfriendly to us and regions that are politically unstable. We also believe that the ingenuity and entrepreneurship of Americans can solve problems such as this.

Americans see that every time that the stock market picks up, gas prices rise as well. We also witness almost everyday new examples of hostilities from countries that provide much of our oil and our military activities in regions that are oil rich. It won’t take much of an outreach effort to make Americans realize that energy prices will go up even if no price is assigned to carbon because heightened competition with the likes of China and others for dwindling oil reserves will cause prices to skyrocket – effectively a tax. Putting a price on carbon will simply allow the proceeds to go towards developing domestic alternatives (and American jobs), instead of going to bolster another country.  

Placing a price on carbon is about accounting for externalities in our energy market – the costs that are not incorporated in the price we pay for energy. Those externalities do not simply include damage done to the environment. Even the most hardened climate skeptic can believe that our reliance on oil can cause costly U.S. militarily intervention in oil-producing regions and represents a vulnerability that our enemies would like to exploit.

Putting a price on carbon is necessary for the energy market to function properly. Alternatives will not be able to compete with fossil fuels price wise in the near term unless the externalities are priced in. And the experience with ethanol underscores how relying on government subsidies and mandates alone can be ineffective and even harmful. The market can work, but it needs some help. Announcing that proceeds would go towards investment in clean energy technologies, helping Americans in need cope with rising energy costs or pay down the federal debt, as opposed to going to general revenues, would likely help gain public approval.

In his address, the president also mentioned building new nuclear power plants and drilling offshore for oil. This was a political and policy maneuver. Many Republicans support nuclear power and expanded offshore drilling. It is also a recognition that we cannot make the transition to renewables like wind and solar overnight. There must be a bridge to this cleaner future that involves responsible domestic production of resources like oil and natural gas, And nuclear will likely be necessary for baseload energy.

There is room for a compromise that involves increased domestic production of oil, natural gas and nuclear energy while putting a price on carbon and laying the foundation for a cleaner future. We are seeing that in a promising collaboration across party lines between Senators John Kerry (D-MA), Lindsey Graham (R-SC) and Joe Lieberman (I-CT). The Gang of Ten compromise in 2008 also shows that bipartisanship is possible.

The president has set the table for a possible breakthrough. What is required now is some public engagement and bipartisanship to make it happen.

The New S-word

February 5, 2010

There is a particular word that the Obama Administration apparently feels is too provocative for public discourse – that word is “stimulus.”

The President mentioned the word exactly once in his State of the Union address, ditto for the White House Budget, which is 192 pages.  Doing one better, OMB Director Peter Orszag and Treasury Secretary Tim Geithner managed not to utter the term at all in their numerous appearances before Congressional committees this week in defending the budget, even though the lawmakers questioning them constantly referred to the word. However, in each of these cases numerous references were made to the official name of the stimulus — the “Recovery Act.”

Likewise, administration officials calling for more public funds to be pumped into the economy consistently refer to the need for a “jobs bill” as opposed to another “stimulus.” The White House has obviously conceded the messaging battle over the stimulus and has decided that the better part of valor is to regroup and re-market the concept. Many voters feel they have benefitted little from the stimulus; terms like “recovery” and “jobs” are what they want to hear.

Going back to the budget, the release of the President’s budget this week, which is marked by deficits and debt as far as the eye can see, has spawned a great deal of discussion over what will be the effects of growing U.S. debt. Policy Daddy has highlighted some of the pieces that are well worth reading and considering:

David Sanger of the New York Times writes that U.S. debt could hurt its global standing.

Unless miraculous growth, or miraculous political compromises, creates some unforeseen change over the next decade, there is virtually no room for new domestic initiatives for Mr. Obama or his successors. Beyond that lies the possibility that the United States could begin to suffer the same disease that has afflicted Japan over the past decade. As debt grew more rapidly than income, that country’s influence around the world eroded.

Sanger also states, “Mr. Obama has published the 10-year numbers in part, it seems, to make the point that the political gridlock of the past few years, in which most Republicans refuse to talk about tax increases and Democrats refuse to talk about cutting entitlement programs, is unsustainable.”

Similarly, Gerald Seib of the Wall Street Journal warns that mounting debt is a threat to national security.

The U.S. government this year will borrow one of every three dollars it spends, with many of those funds coming from foreign countries. That weakens America’s standing and its freedom to act; strengthens China and other world powers including cash-rich oil producers; puts long-term defense spending at risk; undermines the power of the American system as a model for developing countries; and reduces the aura of power that has been a great intangible asset for presidents for more than a century.

Former CBO Director Douglas Holtz-Eakin and former House Budget Committee Chairman James R. Jones also argued recently that American debt has international implications.

From Afghanistan to China to Copenhagen, the actions of President Barack Obama have international significance. However, the greatest worldwide implications will stem from a domestic issue that he must not ignore: our nation’s mounting government debt. The U.S. has a debt problem, and the world is watching. The administration’s response will dictate not only the standard of living of future generations of Americans, but also their country’s global standing.

In discussing his “Fiscal Democracy Index” in USA Today economist Gene Steuerle contends that unsustainable promises are crowding out the ability of government to undertake any new initiatives to improve the nation or meet the needs of the next generation.

Thanks to decades of promises for ever-higher benefits and low taxes for the indefinite future, there’s now less give in future budgets than at any point in American history. At least profligate Congresses in the past confined their excesses and temporarily large deficits to the current year. Until recently, they didn’t box in the future.

Underscoring all of this, Moody’s warned that the nation’s AAA bond rating is at risk because of debt and slow growth. Dealing with our debt in a thoughtful and forward-looking way must be a national priority.

Happy Budget Day

February 1, 2010

Today much of Washington stood still as many plodded through the hundreds of pages and myriad graphs, charts and tables in the White House Budget request for fiscal year 2011. It is an annual rite in Washington that the first Monday in February be spent this way. Though thanks to modern technology the materials are available on the web nowadays, as opposed to a hapless intern or low-level staffer having to trudge to the Government Printing Office bookstore and haul a good 15+ (depending on the number of copies) pounds of dead tree back to the office. Been there, not cool.

Now that “Jersey Shore” is done for the season, this is a good way for those outside the beltway to kill some time before the season premiere of “Lost” tomorrow night.

The budget is where Washington puts the (taxpayers’) money where their mouths are. The politicians can talk about what they want to do, but the budget process is where they have to at least have some semblance of prioritizing; though the process currently is so dysfunctional and marred by gimmicks and budgetary slight of hand that such accountability is diminished. Today we got an idea of President Obama’s priorities. As Congress rips through the request we will get some idea of theirs.

Much has already been and will be written about what exactly is in the budget. Policy Daddy will surely have some things to say in the coming days. But among all the minutiae of the budget and the big numbers — $3.8 trillion in spending and $1.6 trillion deficit for this year — we cannot afford to lose sight of the fact that we are facing a long-term debt crisis. The director of the nonpartisan Congressional Budget Office expressed the fundamental issue last week in his blog:

A large and persistent imbalance between federal spending and revenues is apparent in CBO’s projections for the next 10 years and will be exacerbated in coming decades by the aging of the population and the rising costs of health care. That imbalance stems from policy choices made over many years. As a result of those choices, U.S. fiscal policy is on an unsustainable path to an extent that cannot be solved by minor tinkering. The country faces a fundamental disconnect between the services that people expect the government to provide, particularly in the form of benefits for older Americans, and the tax revenues that people are willing to send to the government to finance those services. That fundamental disconnect will have to be addressed in some way if the nation is to avoid serious long-term damage to the economy and to the well-being of the population.

That’s the problem in a nutshell. And it will be a tough nut to crack. Although voters are growing increasingly concerned about rising federal deficits and debt, we need to recognize that addressing the issue will require all of us to prioritize how we want our tax dollars collected and spent. We are finally doing it at home and we must now also bring that same new-found sensibility to what we expect of our government and what we expect to pay for. Our leaders will have to make some tough decisions and we cannot let demagogues cloud the debate.

Do we need a Debt Czar?

January 24, 2010

The Senate is currently trying to raise the statutory debt ceiling for the country. Our debt is projected to reach the limit next month. If we reach the limit, then the government will no longer be able to issue debt, which would mean we could no longer pay our bills.

The U.S. has been on an unsustainable fiscal course for some time. The recession and measures to combat it have exacerbated the situation.

As Congress and the White House seek to calm voters angry over the fiscal recklessness is Washington, as well as markets and creditors concerned about our ability to meet our financial obligations, they are considering several proposals to address a fiscal crisis that many see coming.

So, given the proclivity of this administration to appoint “czars” to address critical issues; do we need a Deficit Czar? My answer is “no,” considering that the numerous czars already in place have little to show in the way of success. Depending on who’s counting, we have between two and three dozen czars dealing with issues such as health care, climate, the economy, and the auto recovery. 

But something needs to be done to prompt action and show that we as a nation are serious about tackling the debt. A more promising idea is a commission to address the long-term fiscal challenges. Granted, commissions in Washington don’t have such a great track record either. Many well-intentioned panels with impressive membership have held hearings, deliberated in earnest, and issued thorough reports, only to see their proposals gather dust.

However, the fiscal commission proposal that the Senate will vote on Tuesday would be different. Under the legislation being considered, Congress would be required to vote up-or-down on the recommendations of a bipartisan fiscal task force.

Since our leaders in Washington have been reluctant to address the dilemma in a responsible way by making the difficult, yet necessary, decisions to get the country’s fiscal house in order. Perhaps a commission with some teeth could spur action.

Creating a Climate for Change in 2010

January 2, 2010

The year 2009 ended on an uncertain note regarding climate change. The conclusion of the recent climate summit in Copenhagen produced an accord that fell well below the expectations that the year began with, although it saved the event from complete failure and set the stage for possible advances in the near future. As 2010 dawns the way forward for achieving concrete solutions is unclear. What is needed is a shift in the myopic focus on mitigating climate change to developing a comprehensive U.S. energy and climate strategy that entails environmental sustainability and energy resilience.

The chaos that seemed to reign during much of the proceedings in Denmark has convinced many observers such as Thomas Friedman that the current approach is not working. The Copenhagen Accord reached between countries including the U.S., China, India, and Brazil, although derided by many because it is non-binding, saved the summit from a collapse on the scale of the Seattle world trade talks in 1999. This achievement cannot be underrated, seeing as the WTO and the movement towards multilateral trade have yet to fully recover from the Seattle debacle. Shortly after the agreement was reached, President Obama spoke of the vital role of technological innovation in moving forward.

Maybe some of those combating climate change will finally have the revelation that the largest emitters of carbon are the fastest growing economies, who are all vying for global economic supremacy. Reframing the movement as creating new global markets for cleaner technologies will get these economies to compete against each other to create and adopt carbon-reducing innovations. Recasting the issue will be essential to building public support for changing energy habits, which is really what it all comes down to.   

It is no small irony that the Copenhagen climate conference ended as Washington, DC braced for a major snow storm. Many in the region paid little attention to the details of the accord as they dug out of over a foot of snow. This is the time of year when many Americans sarcastically ask “What happened to global warming?” while struggling though freezing temperatures. In order to achieve a real breakthrough, advocates must recognize the conditions that the average person/family faces and how that will color their views on the issue. This is most evident when it comes to the economy in the wake of the economic collapse that has affected everyone. For the foreseeable future, when the average American hears of “green” they will be thinking of money.

Most Americans have difficulty fathoming how a two degree increase in global temperatures will spell calamity or the urgency of reducing the parts per million of carbon dioxide in the atmosphere from 385 ppm to 350 ppm. Instead of relying so much on complex and abstract scientific calculations and disaster scenarios that strike many as melodramatic, climate activists should speak to the concepts that Americans value and understand the most, such as innovation, entrepreneurship, competition, and resilience.

With the fate of cap and trade legislation in Washington appearing bleak at this point, looking beyond the beltway will provide clues as to how to get Americans behind energy reforms. Emerging “smart grids” in Boulder, Colorado and Austin, Texas underscore how innovative technologies will vastly improve energy efficiency and facilitate greater use of renewable energy while empowering consumers and actively engaging them. The people of Greensburg, Kansas have demonstrated their resilience by not only rebuilding their town after it was devastated by a tornado in 2007, but pledging to make it a “green” town by building structures to LEED standards and using wind power. Fostering innovation and entrepreneurship to create a modern, cleaner, and more resilient energy regime that enhances U.S. security and economic competitiveness are ideas that Americans instinctively are attracted to.

Perhaps the difficulties at Copenhagen will convince more advocates that a new approach is needed.