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Saturday, March 26, 2011

Dude, Where's My Recovery? - Part II

In Part I, I discussed the errors and mistakes made by the Obama administration to arrest the economic free-fall, that have hindered our recovery.  As awful as those mistakes have been, the President was simply following the time honored tradition of jumping off a bridge because your friend jumped.

In choosing to follow the Keynesian formula, Obama has taken our economies normal recovery time of 18 -24 months and extended it into the 3-5 year range.  Just as we have seen happen before from Japan's lost decade to the Great Depression under FDR, such policies are very good at prolonging the bad times and preventing a quick recovery.

I contrasted our current remedies to Reagan's policies during a similar, if not worse economic predicament.  As the evidence shows, the Reagan recovery took off immediately after the end of the recession and soared in an unprecedented fashion (Obama likes to use the term unprecedented falsely, but in this case the term fits).  Unlike the failed Keynesian model, Reagan's supply side model worked and has been emulated across the globe to great success, especially in the former soviet satellite nations.

Today, we will discuss President Obama's plans to transform our economy.  As his chief of staff Rahm Emmanuel stated, "You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things you think you could not do before."  President Obama has definitely used this crisis.

During the 2008 Presidential campaign, all of the candidates made one of the most ridiculous arguments I've heard.  They would all put money into creating Green jobs.  This was worse than the 2000 campaign's obsession with a "lock box".  Every campaign has it's ridiculous issue that seemed to make sense at the time and this was 2008's.  (go back and watch the speeches from previous conventions to see what I mean - Mondale '84 is a hoot)

Watching Hillary Clinton , Barack Obama and John McCain all talk about investing in green jobs, I tried to imagine any of our pre-industrial age presidents campaigning on the promise of creating new Black jobs (oil/coal).  It may have happened, but it would have been silly.  The energy revolution of coal and oil would have happened with or without any government intervention.  Why?  Because they were an improvement over the energy resources available at that time. 

If anyone other than Barack Obama had won the Presidency, the Green revolution would have went the way of the "lock box" - a campaign issue only.  But rather than allowing it to become an amusing anecdote, President Obama has made it the centerpiece of his economic policy.  All that he does is infused with his calls for a green economy full of green jobs.

In the early months of 2009, the Obama administration made the choice to take over insolvent auto manufacturers.  While this was done to "protect jobs", it soon became obvious that his true intention was to coerce a private company to manufacture the government's preferred green vehicles.  Here's the President's EPA chief Lisa Jackson, in an NPR interview,
The President has said — and I couldn’t agree more — that what this country needs is one single national road map that tells auto makers who are trying to become solvent again, what kind of car it is they need to be designing and building for the American people.
I'm sure Teddy Roosevelt went to great lengths to coerce Henry Ford to make those right kind of cars.

We all know that the Green revolution is great and all those green jobs are just waiting to be created, but I can't help but ask why?  For all the rhetoric, I can't seem to figure out why green jobs are any better for our economy than any hypothetical red jobs that would be created in the event that vampires are in effect real.

Let's run down a quick history lesson.  Prior to oil/coal, our energy needs were met almost entirely by wood.  Oddly enough, the Black revolution was really a Green revolution.  As the 19th century beget the 20th century, our forest lands were on a steep decline.  The movement away from wood's use for energy production, along with President Roosevelt's Conservation campaign arrested that decline.   The end of the 20th century found America with more forest lands than existed at its beginning.

This Carbon revolution fueled the new electric grid which helped spur the industrial revolution.  There was no need for government to increase demand for this new energy, but the government did see a need on the supply side.  Our new burgeoning industries could not grow to their full potential without a consistent supply of these new energy sources, so the Federal and state governments began to aid and subsidize research and exploration to ensure an ample supply of affordable fuel for our growing economy.  These subsidies paid for themselves as the GDP of the nation increased and tax revenues grew.

Understand, oil and coal were never the real revolution.  The revolution was the ability to adapt that fuel into electricity and mechanization in new ways.  The steam engine could be powered by wood, but coal was an improvement in temperature and in bulk - coal took up less space and burned hotter.  But then the steam engine was made obsolete by the internal combustion engine which ran on refined oil (gasoline).

Green energy cannot spur growth unless it either represents an improvement over our existing energy sources or can be used differently to power new and revolutionary products and only then if it does so efficiently, dependably and is affordable.  Otherwise, what's the point? 

Solar is great for the small calculator on my desk or for the rechargeable batteries in my lawn lights, but it must become a heckuva lot more efficient and dependable before it can power my car.  But how do we get there?

Investments in research and development are what is needed to achieve those goals.  But this administration is not funding research - they're not even funding supply.  They are funding the demand side.  They're trying to create demand for a product that is not quite ready for primetime.  Ed Morrissey writes at HOTAIR,
economist Robert Michaels points out, most of the subsidies involved in green energy come on the commercial end, not in research.  Government is trying to pick winners and losers with current technology.  As the chart shows, government is picking the least efficient technology (by orders of magnitude) as winners.  They’re deliberately hiding the price on the product in order to convince people that this energy is competitive, while taxpayers pick up the rest of the bill. 

While we often hear that subsidies are needed to allow solar and wind to compete, this chart shows this is not a valid argument.  No matter the amount of money oil and coal receive, they are the most efficient use of taxpayer dollars for providing energy.

If the Green energy were truly revolutionary, demand would need no subsidy.  But even with subsidies to the consumers, Chevy sold less than 300 Volt electric vehicles.  Perhaps if the price of gas continues to rise, these cars may seem like a good idea, but until then I would not count on Chevy to make money despite the Federal government telling "auto makers who are trying to become solvent again, what kind of car it is they need to be designing...for the American people". 

This brings me to the real problem.  If the government chooses to toss a few billion dollars down the green hole, oh well.  But the current plan also includes raising the prices of our current energy sources.  Less than 300 Volts sold - no problem, let's get the price of gas moving up and see if that helps.

Obama shuts down oil drilling in the gulf.  He shuts down plans for a huge coal fired power plant in the Midwest.  He speaks of plans for drilling that never really seem to take place.  Instead, we have new restrictions put into place.  Easily accessible new oil finds are off limits.  Promises are made to invest in nuclear energy, but no action follows.  What is Obama's energy policy?  Do we have one?

Energy Secretary Steven Chu went on the record after being appointed by President-elect Obama that he would like to see the price of gasoline boosted up to European levels.  Now that we see it heading that way, are we to assume that this is all coincidence?

There is no surprise that this man-made crisis has developed.  In speaking during the 2008 campaign, Senator Obama said,

“Under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket.  So, if somebody wants to build a coal plant, they can — it’s just that it will bankrupt them, because they are going to be charged a huge sum for all that greenhouse gas that’s being emitted.”
A cheap and abundant energy supply combined with American ingenuity lifted the United States to it's current status as an economic superpower.  Even as immigrants from the world over arrived on our shores, the standard of living in America continued to rise ever higher due to the growth fueled by our energy resources. 

President Obama seeks to destroy all that we have built.  It's possible he doesn't see it, but that doesn't make it less true.  As Victor David Hanson wrote at National Review in his article, A Man-Made Energy Crisis,
These Utopians have no idea that without reasonably priced fuel and power, the self-employed farmer cannot produce food. The private plant operator cannot create plastics. And the trucker cannot bring goods to the consumer...
The future of our nation does not rest upon whether we manufacture wind turbines for unprofitable wind farms or electric cars that no wants to buy.  It rests upon our ability to have access to efficient, dependable and affordable energy resources.  This President has made it his stated goal to relieve us of this ability.

At present, there is no Green Energy Revolution - it doesn't exist.  Maybe one day it will.  But I can guarantee you that the windmills we build today are not part of it.  What it will look like, I can't say.  But just like Edison turning on a light bulb, when it happens, we'll know it.

As long as Obama continues to create a facade of affordability for renewable energy by pouring taxdollars into solar and wind while turning off our nation's oil spigot, the recovery will never ignite.  How could it?  Without fuel, we'll never start a fire.

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