U.S. Economy Under Assault By Higher Energy Costs
08/26/2005
Paul Munnis
It should be a time of smiles and congratulation speeches for Mr. Bush as deficit spending money begins to be distributed all across America. The money is showing up in the form of energy and transportation programs and it was allocated by Congress prior to going on summer recess. The deficit money should create jobs and stimulate the economy making it look to citizens like they are better off under Bush.
There are two big glitches in this picture. The first is that the money is borrowed money, or the political equivalent of credit card debt. The second is that soaring energy prices threaten to send the U.S. back into recession and to create large inflationary increases in the cost of living.
This means that American companies can hold the line on prices or they can create jobs but they cannot do both while at the same time showing a smiling face to stockholders because of better profits.
From where we are setting it looks like we will experience the worst scenario of all, borrowed money meant to invest in American infrastructure, with yet another recession caused by higher energy costs working their way through the U.S. economy. Combine that with tighter money caused by the Fed’s raising bank rates and interest levels on credit cards that are high, plus frozen wages from business, and taken together you have a formula for a failed economy.
About the only positive thing is that the effects of the next recession will be milder because the deficit spending money makes it look statistically better.
Other editorial writers are correctly pointing out that the time for cheap energy and low subsidized oil and gas prices have ended in America. It is clear that American families cannot just take this in stride, there will be impacts to the American way of life as a result. There will be citizen anger (there already is) and it will reflect poorly on Washington. Even against the backdrop of the 2006 and 2008 elections, Americans could be treated to gas and oil rationing scenario in order to dampen the rising cost of energy while forcing the demand curve to an even lower level. It is hard to imagine a low cost-energy economy by the summer of 2006.
Bush’s failure to provide national leadership in energy conservation, alternative energy, renewable energy, and to put in place macro-economic policies to dampen energy demand, will come to haunt him in the coming weeks and months. His Energy Bill that failed to provide the leadership will be seen as a disaster for America. GOP Congressmen will be the first to suffer for their role in this debacle.
In the meantime has anyone seen or heard of Dick Chaney? He is our VP in charge of creating an energy strategy and charged with crafting an energy policy for America. He needs to tell America why his plans have failed us so badly. It seems that his lips are sealed just like his energy strategy documents are sealed.