By Chriss Street
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President Obama’s expected naming of Ernest J. Moniz as the next Secretary of Energy represents the recognition that oil and gas development is the only potential revenue source available for the Administration to avoid the type of austerity spending cuts sweeping Europe. Mr. Moniz is a respected expert on electrical energy and currently serves as Director of MIT’s Energy Initiative, a research group that is heavily funded by the oil and gas industry.
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The European PIIGS (Portugal, Ireland, Italy, Greece and
Spain), have been forced by the International Monetary Fund, dominated by the
U.S., into austerity programs that raise taxes, slash crony spending and
eliminate union feather-bedding. But after four years of draconian
austerity, the Greek Finance Ministry reported the tiny nation saw tax
collections fall 15% over last year. It
seems that if you raise taxes, businesses deplete their
cash reserves, curtail reinvestment and postpone payments to their own vendors.
Economists refer to this phenomenon as austerity’s self-reinforcing “cycle of
pain”. As tax collection falls, governments raise tax rates, perpetuating
another cycle of pain.
The most recent Congressional
Budget Office’s projections estimate
the U.S. deficit will climb by $7 – $9 trillion over the next 10 years.
If these deficits actually happened, the United States will eventually suffer a
monumental debt crisis. But unlike tiny Greece, who can ask for aid from
the IMF, there is no entity large enough that could or would bail-out the U.S.
To address America has the debt and spending crisis,
Congress raised some taxes last month and set automatic spending cuts, known as the
sequestration, that become effective next month. The pain is
structured to be shared equally between the military and the welfare state with 9.7% cut in defense, 7.3% in non-defense
and 2% for Medicare spending. Anticipating coming crunch,
government spending fell at an annual 6.6% rate last quarter, driven by a 22.2%
decline in defense spending. This subtracted 1.33% from the
economy. Vendors to government cut their rate of inventory accumulation,
slashing another 1.27% of GDP. Thecombination of these factors slowed the
economy by at a 2.5% annual rate a
small economic contraction.
President Obama is getting lots of grief from public sector
unions regarding the
potential size of the sequester lay-offs. Under the Executive Branch of
the federal government, he controls1,942,528 “permanent employees” and 167,675 “temporary employees”.
The U.S Postal Service is off-budget as self-funding, but they were required to dump Saturday services.
Unions could decide to share the sequestration pain to save jobs, but the Office of
Personnel Management guidance calculates
all federal employees would be forced to take a 22 days of un-paid furlough a
year to meet sequestration cuts. U.S. Army estimates that 78% of its
combat brigades will be forced to skip training due to sequester. CBO Director Douglas Elmendorf of the
bi-partisan CBO recently
warned that too much in spending cuts will undermine the already weak
economic recovery.
Steven Chu was the tip of Obama’s spear to push “public
investment” schemes in wind and solar energy, while fighting against fracking
and other new petroleum drilling innovations. When Chu was appoint 4
years ago crude oil hovered around $35 per barrel, today it sits at $95.
With the shale boom driving huge tax collections for certain states, federal
unions looking to get in on the gravy train helped push Chu out.
Dr. Moniz looks to be the ideal choice as Secretary of
Energy. He was confirmed by the US Senate as Under-Secretary of Energy
during the Clinton Administration and his academic credentials at the
Massachusetts Institute of Technology are stellar. He strongly
advocates that developing low-cost natural gas for
electricity is a “bridge fuel” to lower carbon pollution.
In Meeting Energy Challenges: Technology
and Policy Moniz
wrote: “Adequate electricity supplies are central to economic growth and
quality of life.” … “In the industrialized world, capacity needs to be increased in a manner
consistent with the strict reliability requirements of the digital economy. In
addition, outdated infrastructures need to be modernized, and suitable
mechanisms for market deregulation need to be developed.
America is on the cusp of an energy independence that will
drive prices down and spur a new manufacturing boom. Obama may be
appointing a pro-energy Secretary of Energy to drive tax revenue up to save
public sector union jobs. If that is what it takes to send Steven Chu
packing and bring in Ernest Moniz, I’m all for it!
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