Fiscal Year (FY) 2013 budget is generous to manufacturers and it lowers corporate taxes across the board to 28%. But will it create jobs on a war footing while containing inflation?
To take advantage of lower taxes on businesses and incentives for manufacturers the private financial markets must invest. Where can they invest? In autos of the future which create jobs for all – low, middle and upper income groups.
American energy policy can be summed up in 10 words: Build The All-Electric Car And The Rest Will Happen, like Shoeless Joe, in the Field of Dreams, who comes to Ray the bankrupt farmer.
Obama, in a bankrupt America, needs to hear voices and then he may listen better.
He gave a speech in Miami on American Energy. It reminded me of my days on the Pickens Plan grassroots organization as the soon-to-be State Leader of Maryland when I made an argument with the same headline on July 8, 2009, declared by T. Boone Pickens as Energy Independence Day on the founding anniversary of his natural gas plan. Since then, the president and the Congress have acceded to demands for more natural gas extraction in the country with a few more wrinkles such as cleaning up the effects of fracking chemicals to be ironed out.
Natural gas moves 18-wheeler trucks but not the country. This president aspires to move the country which is consuming less oil at the moment because a big part of the country is not going to work.
The short run is demanding more jobs. January 2012 has not been good for the unemployed. Unemployment number, as expected after the holiday season, despite seasonal adjustments, did not change. It stands at 8.3 per cent. A better number around 4% can move more trucks.
The dollar and the oil appear to be roiling the markets again. The cheaper dollar cannot buy as much oil as the stronger euro, despite the euro’s crisis. So, oil prices are rising as is the dollar value of the oil imports. Besides, a recovering world needs the black gold, so the demand is rising. And the double whammy is good for Wall Street traders who are ploughing their money into commodities once again in a recovering economy like a herd of sheep afflicted with short term memory loss.
This time around, however, the government will not be as kind as it was in 2007. First, because the rising oil prices will increase inflation and second, because the country does not want to depend on oil. This oil rally should spark the plug on Capitol Hill to pass sensible energy legislation.
The energy policy debate from the days of the ‘70s oil shocks, when most of the world’s oil and gas were locked up behind the iron curtain of the Soviet Union and in the tango of the nearly perpetual geopolitical brinkmanship of the Cold War, is eventually consummating in self-reliance in a more free world.
The nature of this self-reliance is not of the protectionist variety. It is not inward-looking. Oil and gas producing countries cannot but continue to sell their commodities to those who need them around the world. Yet, self-reliance cannot be outward-looking either. Because they need the resources more than they ever needed them before. Not because foreigners do not like us, but because they want to be like us. It is a legitimate aspiration when the lifestyles of $40,000 average national income countries co-exist with those of the lifestyles of less than $1000 per capita countries separated only by images and sounds of each other on the television and internet.
The short-run return-seeking behavior of the financial markets in commodities is a symptom of real scarcity, scarcity being the root cause.
Roadways and airlines systematically sidelined railways, and gasoline engines deliberately stunted the development of energy alternatives for most of the last century despite the oil shocks of the ’70s and Detroit Electric from the late 19th century.
Energy diversification is a structural economic transformation with many stakeholders. The renewables groups, the non-renewables groups, the environmental groups and the funding groups, government (that is, the taxpayers) being one of them and Wall Street being the other.
The strategic national security issue is not about one group or the other, but the country being able to have access to all the energy it needs, whatever happens to any one particular resource, at a price that is stable to facilitate economic growth without increasing inflation.
Dependence on one resource, whether it be geographically located within or outside the United States, is a single point of failure if not because of geopolitics or natural disasters but simply and ironically due to ever higher demand around the world.
Energy for the United States is as American as an apple pie or a pizza at a college fraternity party. Every slice of the pizza, each a different kind of energy, has its slot at the table and this is the true antitrust that we need in the energy market.
The economics of energy is that of simple supply and demand. Suppliers supply, consumers demand. Consumers pay for what they demand. What they pay for, in total energy dollars spent by U.S consumers, is also known as the energy footprint of the country.
We clearly have a planetary energy footprint the size of the abominable snowman. To reduce this footprint to a level that is decent and not malodorous from the vulgarity we engage in as a country, whether that be wars over oil and thousands of deaths and disablements that have exceeded those who died on 9/11, we need to produce more of our own energy to be independent not of energy, but of energy imports for which we pay other countries.
This takes us back to the pizza pie commonsense. We do not have all the oil under the land within the geopolitical territory of the United States even if we stripped it dry to the last drop. So, we need to supplement oil in the foreseeable future with other sources of energy, and consume less at the same time, not to diminish our comfortable lives by wearing sweaters by a fireplace like Jimmy Carter in an oil crisis, but with technology that preserves and enhances the standard of living through smarter consumption of energy.
The higher the efficiency of energy consumption the more prolonged is the life of a non-renewable resource such as oil and gas, keeping the Exxon-Mobils and the Saudi Aramcos of the world in business that much longer. The King of Saudi Arabia realizes it, in spite of being nearly 100% dependent on oil sales for the welfare of his country, but some in this country do not, with an economy that is the largest and the most diverse in the world.
The other slices of the pizza pie besides the oil and gas industry (an energy monopoly albeit the antitrust breakup of Rockefeller oil) are largely wind and solar, which together, when combined with consumption efficiency can literally remove the entire housing sector off oil and gas dependency or about 40% of U.S energy consumption that will not be dependent on heating oil and heating and cooking gas.
U.S energy market share of foreigners, is currently, the size of one-half of the U.S trade deficit annually excluding the defense expenditures to secure unstable parts of the world for the free flow of oil to the United States and the global economy (not including the costs of life and limb in doing so), the defense budget itself being about $650 million.
At the turn of the last century Detroit Electric was producing electric cars. They were the way to go until Henry Ford’s Model T had debuted, increasing the dependency on oil. Solar power has been around since the late President Nixon’s Operation Independence in 1973 and President Carter’s formalization of the Department of Energy in 1980 rooted in the Tennessee Valley Authority (TVA) and the Manhattan Project in the 1930s and 1940s. And these two technologies have only improved in the last 40 years. Communications and computing, which began as a centralized behemoth a century ago, have evolved gracefully into a seamless, integrated, distributed, centralized-decentralized resource through exponential technical change becoming available anytime and anywhere. The same can be true by bridging the divide between energy producers and consumers with distributed solar where energy consumers are also producers, mitigating coal pollution and power losses on transmission lines.
Bridging that divide need not be predicated on changing our energy production and distribution infrastructure. With solar power every home and workplace can be its own standalone electricity producer, yet connected to the existing electricity grid, to draw in power when they fall short and sell it back to the grid when they use less of their own. Similarly, with electric vehicles, there would be no reason to visit a gas station just as there is no reason to go anywhere to recharge the batteries of our mobile phones. Both of these together, will reduce the demand for power on the existing electricity generation infrastructure in the United States and the demand for gasoline.
As a first step, even without clean coal, burning it less by substituting it with distributed small solar and making all buildings more energy efficient will substantially reduce pollution. The fast becoming norm of the American way of life of mobile communications and computing, if only work is organized to leverage it, will reduce the need to both commute and travel, reducing gridlock, congestion, pollution and the wear and tear on the nation’s roadways and airways.
The administration is proposing restrictions on new coal plant permits and on modifications of existing coal plants unless the power producers comply with clean energy goals. This is reasonable and forward-looking rule-making which need not necessarily conflict with the Congress’s goals to provide incentives for change. In fact, it is consistent with the intent of the Congress.
More than 40% of the country’s power production currently comes from coal and coal is abundant and cheap not only in the United States but elsewhere around the world. It must be cleaned up implementing FutureGen 2.0. Through 2030, both the renewable and non-renewable clean electricity and clean transportation industries should be fully exempt from all corporate taxation.
Changing the way we live in the immediate term by using existing technologies and domestic resources such as distributed small solar and coal/combined cycle for distributed/centralized-decentralized power production driven by only all-electric vehicles and by providing tax incentives to make that happen within the next decade can go a long way in properly sequencing America’s transition by 2020 to the next generation, fully clean energy powered economy.
By 2020, United States can be fully self-sufficient in energy with small policy changes in 2012.