This year's elections will be largely about the economy many political experts agree. Inflation is a worry in the U.S., "Wall Street is braced for more pain," and Japan is worried about a global slump, all according to London's Financial Times. One economist is very worried, my friend Jon tells me via this forwarded story from AlterNet.Org. Titled, *"Meet the Economist Who Thinks We're Doomed," Dr. Nouriel Roubini believes we face a housing bust, a huge credit crisis, an oil shock and a deep recession. Just for starts.
The U.S. House and Senate will begin their last sessions of the year after Labor Day. There is every possibility that our congressional leaders will have gotten an ear-full during the recess from constituents in their home districts. It is not a particularly good time for Republicans in their states or in Washington. With retail gasoline prices the lowest in 14 weeks, it is time to take a look at the current energy political situation. Patrick O'Connor and Daniel Reilly from Politico.com (8/19/08) have written a good synopsis of the points of contention among our senators and reps., titled, "Pump primed for fall fight on energy." To quote:
There’s a little something for everyone to hate in the energy proposals House Speaker Nancy Pelosi (D-Calif.) articulated over the weekend.
Republicans dislike her plan to repeal a series of tax breaks for the oil industry. Key Southern senators have opposed previous measures that would require utilities to produce more renewable wind and solar power. And Pelosi herself can’t be thrilled with the prospect of opening more federally protected waters for offshore oil and gas exploration.
The question for September: Will leaders from both parties overcome their distaste for various parts of the proposal and swallow some kind of compromise? With just three weeks remaining in the session, that seems highly unlikely. But public pressure has become intense enough that lawmakers may be compelled to act when Congress returns from its summer break.
This tells the real story of "DRILL HERE, DRILL NOW TO LOWER GAS PRICES. Senator McCain has decided to wade right into the middle of this today. Memeorandum has it that, "MCCain to visit oil rig as Fay's winds keep to east." This is an excellent analysis from U.S. News and World Report. "Also the oil companies already have more acres under lease (that are not being drilled), than might become available for lease," Jon, sender of this link, says. *What Happens If Congress Lifts Drilling Ban? -" To quote a bit from the story:
. . . there are major obstacles that are rarely addressed. New drilling, if it does happen, won't take place willy-nilly. The most likely scenario, if Congress were to relax restrictions on drilling in federal waters, is that individual states would get the authority to approve or reject new drilling.
Yet even that issue is, technically, undecided. "There's no historical precedent here for this sort of action," says Eileen Angelico of the Minerals Management Service, the Interior Department office that handles offshore drilling in federal waters. "It all depends on what Congress decides to do."
One hint may come from a recent proposal by the so-called "Gang of 10," a bipartisan group of senators led by Democrat Kent Conrad of North Dakota and Republican Saxby Chambliss of Georgia. Earlier this month, just before Congress took its August recess, the group announced a compromise energy plan to open up the eastern Gulf of Mexico and give four states--Virginia, North Carolina, South Carolina, and Georgia--the right to "opt in" to new leasing. Chambliss said that it would be up to the state legislatures to approve new drilling under the proposal.
Globalization has also negatively affected the economy and is a big issue in many swing states such as Pennsylvania, Michigan and Ohio. From Time Magazine (8/14/08) published an article on, *"The Great American Yard Sale." Written by Jeff Israely and William Boston it regards the sale of American companies to foreign buyers. To quote the piece's conclusions of an expert:
Viewed from ground level, rising investment in the U.S. looks like a great thing. Without the inflow of foreign capital, the dollar would probably be even weaker and interest rates and inflation could be higher. But Joseph Stiglitz, a Nobel Prize winner and former chief economist of the World Bank, says there may not be a happy ending. For years, Stiglitz has warned that Americans are living beyond their means. The U.S. trade deficit exceeded $712 billion last year, or 5.1% of GDP. That's nothing more than America's borrowing money from abroad to support a lifestyle that is unsustainable. But whether foreigners are now buying hotels, pharmaceutical companies or utilities, the numbers tell us that the rest of the world is no longer willing to foot the bill to feed America's consumption habit. "It's not just that American assets are cheaper. The untold story here is that foreign investors are no longer willing to finance American debt," says Stiglitz. "They now want equity."
We used to measure the economy in terms of GNP, which is the amount of income produced by U.S. citizens. But now we measure it by GDP, the income that is actually
produced in America. The distinction becomes important, says Stiglitz, when an increasing proportion of the country is owned abroad. "If you were to look at America Inc. as a company, it's like owning a company and you own a smaller and smaller fraction of it. So the fraction of America Inc. owned by Americans is diminishing," says Stiglitz.
That means that when the economy recovers, there will be less wealth left in the country to reinvest in it. But then returning to the original question--Why is the American yard sale not setting off alarms?--Stiglitz explains that the alternative is even worse. "There isn't an outcry," he says, "because the focus right now is the weakness of the American economy, and anything to keep our economy going is welcome." That's why no one really objected to Citibank's becoming a Middle Eastern--financed bank, because it's better than Citi's becoming a dead bank. "But clearly we're worse off as a country," he says.
When the dust settles on the current downturn, the U.S. economy will probably regain its dealmaking swagger. But unlike the Japanese experience in the 1980s, the current trend of foreign buyouts won't be unwound. Yet the only way for the U.S. to avoid becoming a second-rate economy is to make the investments necessary to stay ahead in knowledge and innovation. Will we do it? There are a whole bunch of rich foreigners who have just bet their future on it.
Congress is, of course, not the only one thinking about energy and the economy. Candidates running for office understand the dictum, "It's the economy, stupid." And so do we who are hit by these bad situations, the awful legacy to be left by OCP (our current president). We "political junkies," sticking together, can make the difference, come November. A big Hat Tip to my friend Jon who keeps me supplied with a variety of very interesting articles. His most recent ones, used in today's post are *starred above.
To be continued --
View my current slide show about the Bush years -- "Millennium" -- at the bottom of this column.
(Cross-posted at The Reaction.)
My “creativity and dreaming” post today is at Making Good Mondays.