The four-pronged attack on our future prosperity
Death by a thousand cuts. Or in the case of the efficiency of the American economy, by at least four — energy policy, healthcare policy, trade-union resurgence, and fiscal madness.
Let’s start with energy. The world is awash in it. The wind blows and the sun shines, at least sometimes and somewhere. Oil and gas wells gush, and substantial oil and gas-rich areas have never even been explored. Coal abounds. Nuclear power can be had at a cost. So why has President Barack Obama made energy policy one of his top priorities?
One problem is that oil is largely in the hands of very bad actors. Still another is that almost all sources of energy have an impact on the environ- ment: solar panels consume acres of space; wind machines are considered eyesores; oil, natural gas and coal emit carbon dioxide; nuclear power generates long-lived and dangerous waste.
Some of these problems can be solved, though not without cost. Domestic producers of natural gas tout their product as a substitute for petrol. Progress is apparently being made in developing cars and trucks that run on batteries. The efficiency of vehicles is being increased, albeit in response to inefficient government edicts rather than to more efficient price signals.
Never mind that the infrastructure for these various petrol substitutes has not been developed and that the cost of these technologies exceeds that of the petrol-fuelled internal combustion engine by a good margin. They must be listed in the possible column. That’s the good news.
The bad news is that even if these technologies are developed, we will still need lots of oil, and that oil is in the hands of the bad guys. The Saudis and their Opec allies control the bulk of the world’s reserves, and use the proceeds to fund the spread of radical Islam and jihadism. Hugo Chávez uses the earnings from his increasingly clapped-out oil industry to fund his takeover of Venezuela’s private sector and his anti-American activities. Iran’s mullahs survive only because they have oil revenues with which to bribe the masses, pay for their nuclear-arms programme, and fund terrorism.
The problem of the unfortunate location of oil reserves can’t be solved by research into alternatives, or by conservation. As far ahead as we can see, we will need the bad guys’ oil, and Europe will need natural gas from an increasingly bellicose Russia. Both problems can be ameliorated by diversifying sources of supply. Investment in the oil industries of Canada and Mexico certainly seems worthwhile for America, as does investment in natural-gas pipelines that bypass Russia for the EU. And maintenance of a military strong enough to guard supply routes and protect the Saudi oilfields from falling into even worse hands seems essential.
It is the environmental issues that seem intractable. At one time a united environmental movement was of one mind on important issues. No longer. Obama and the greens favour the development of solar and wind power, but other environmentalists oppose dedicating substantial swathes of desert to solar panels, and Senator Ted Kennedy is leading the charge against building windmills in sight of his family compound at Cape Cod.
Some environmentalists see pollution-free nuclear power as an important part of future energy supply, others oppose new plants because there is no agreement on the disposal of nuclear waste. If environmentalists in America agree on anything it is that coal presents the greatest threat to the environment and that the courts can be used to drag out the process of obtaining planning permission until most projects are abandoned.
All of this means that the electrical energy needed to power battery-driven vehicles won’t come cheap, if indeed it is available at all. Industry sources fear that with coal and nuclear more or less off the table, at least for now, we will end up rationing electricity.
Energy is not the only sector that is likely to be less efficient than in the past. It is no coincidence that America’s superior productivity performance has coincided with the decline of trade unions, with the important exception of the motor industry. And we have seen how union compensation scales and work rules contributed to the bankruptcy of General Motors and Chrysler — a fate the non-union car manufacturers have avoided. Yet Congress and the president are preparing to spur union growth by eliminating the secret ballot in union-recognition elections and, rumour has it, by writing advantages for union members into tax laws.
There is worse. Obama is about to engineer the takeover of the healthcare sector — unless private-sector insurers can figure out how to compete with a new government entity that needs no profit and can set premiums secure in the knowledge that taxpayer funds are available in a pinch. Estimated cost over 10 years: $1.3-1.6 trillion (£790-970 billion) adding to the upward pressure on taxes, especially on entrepreneurs, created by the administration’s runaway deficits.
The administration simply has no credible plan to reduce the deficit to preserve the value of the dollar and to prevent interest rates from rising as wary investors price the risk of inflation into what they are prepared to pay for government IOUs.
Two thoughts pierce the gloom. The first is that the American economy might be large enough, and resilient enough, to remain competitive even bearing the weight of the new inefficiencies. The second is that voters will demand a change of course before Obamanomics is permanently embedded in our system. Voters worry that they are leaving their children a mountain of debt. Already Obama’s approval rating among independent voters — Wall Street Journal analyst Gerald Seib calls them “the canaries in the coal mine of American politics” — has fallen from 60% to 45%. Even if the president doesn’t get the message, Congress might.
Irwin Stelzer is a business adviser and director of economic policy studies at the Hudson Institute
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