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Economic Crisis and the Election

Over here in Thailand, where my wife and I are teaching–she full time, and me part time while I work on my fiction–it would be easy to ignore what’s happening in the most important election of my lifetime (I was born in ’81). We don’t have cable, so all my news comes from the web: The Economist, The Times, You Tube for things like Gibson’s interview of Palin, and the Thai English dailies for local news on the upcoming coup. It is shocking to read about what is happening in America. I feel a similar anxiety that I had in 2001 when I was in college in Boston. In the past year I’ve expected our economic future to be as rough as stories I’ve heard about the recession of the 70’s, but now it seems like we’re getting into a whole new kind of slump, approaching the spirit crushing nature of the Great Depression. I’m an optimist in life, but all indicators that I’m reading about are pointing to more bad news. I sense the worst is yet to come.

Clearly we need an inspirational and positive leader to help us through these tough times. I am not a hater of Obama, but I remain deeply skeptical. I want to be inspired by him and I often get goosebumps listening to his speeches, though this may have more to do with my friendship with one of his speech writers. I have never gotten goosebumps from McCain or Palin. And when Biden spoke at my Emerson graduation in 2003, I was totally turned off when he went on a rant about neocons. Inspiring stuff on my graduation day, Biden was not. Obama is the inspirational one, but so many of his ideas go against my small government sensibilities. I can support steps towards socialism given our changing world and current economic crisis, but how realistic is it to expect that Obama can deliver on these promises?

The latest version of Barack Obama’s plan has at least 40 action items, and none of them are small. It reads like a wish list that Aaron Sorkin and his West Wing writers came up with. This is not to say that real thought was not put into it—clearly intelligent people have put their heads together over this, and Obama should be commended on doing that. That being said, how could a President Obama possibly expect to accomplish all these things AND run for re-election? And some of these action items, like the National Infrastructure Re-investment Bank and ending dependence on Middle Eastern Oil, have goal deadlines two years after he’d be out of office, assuming he wins this year and gets re-elected. His Renewable Portfolio Standard goal is even further out: 2025. I’m not against long term goal setting. Heaven knows we need to be thinking more long term. But as a voter, how can I believe that he will accomplish these things? And what exactly would an end to our dependence on Middle Eastern oil look like? An embargo? Is natural gas from Qatar or oil from Iraq evil? If Iraq is still evil, what have we spent all this blood and money on? Are we going to mandate that all countries tag their oil with nanobots and that gas stations reject products that come from black listed countries? If oil from the Middle East was found in our domestic market, what would we do with it? Sell it to someone else? Send it back and demand a refund? Maybe we could put it into mature Texas wells and redrill it as rebranded American oil.

As the son of an engineer who has spent his entire career working for Mobil and now ExxonMobil, I know that as long as the Middle East is producing and America is using, ending dependence on Middle Eastern oil is a myth. Oil markets are global. Ending oil consumption from the Middle East would require forcing American oil companies to stop doing business with some of their biggest clients. How is that a good idea? I think Obama is misleading us when he says we can separate ourselves from Middle Eastern oil; I think he’s smart enough to know better.

Obama says we can get off oil with solar and wind and biofuels, more next generation coal power plants, while avoiding nuclear power. Some problems with this include a bottleneck on silicon production for solar cells, and many people’s reluctance to have windmills or high voltage power line towers in their backyards that would bring wind farm energy to market. The domestic renewable fuel industry takes fuel out of the food pipe line so Americans can drive their gas guzzlers with a green conscience. It’s totally bogus, and as a smart guy, Obama must know this. But of course, he has to help out his Big Farm buddies. Isn’t that just as bad as having Big Oil buddies? Fuel costs have increased the price of food, but so has this irresponsible subsidy of corn and soy ethanol production, which on the small batch refineries, often ends up polluting ground water, as biofuel refineries are waived from EPA regulations. If every biofuel refinery had to adhere to the same strict rules that oil and natural gas refineries do, biofuel would not be profitable, even with the subsidy which makes it artificially competitive. Furthermore, the poorest in the world who depend on our aid of corn and soy, are getting less. Just as we can not drill our way out of this problem, we can not grow our way out with corn and soy (though we should consider allowing the sale of Brazilian ethanol without tarrif). Maybe one day enough ethanol could be made from hay, but our best proven technology is nuclear power and electric cars. Wouldn’t it be great if we could use the nuclear material in our oldest bombs as fuel for new nuclear power plants? In the meantime, we need fossil fuels, even if it comes from the Middle East. How can we demand from our oil companies fuel at the price we want, from the country we want it from, and a cut of profits for people who are not shareholders, while insisting that the company become extinct at some point in the near future? That’s insane. I’d like to see our own government operate with a similar list of demands. After paying shareholders and employees, Big Oil reinvests every dollar it can in further exploration and development of oil and gas fields in order to remain competitive. Why aren’t we demanding windfall profits taxes from Pfizer and Google? Surely we’re as dependent on those companies as we are on ExxonMobil. If we’re going to do this, we should do it right: every executive of every company that makes more than a billion dollars should pay a special tax on all pay, including bonuses. The Over-Achievement Tax would punish the wealthiest companies for paying their managers such extravagant fees and allow the rest of the country to feel their own oats.

Given our crisis, what are the things a president can do immediately, besides spear-heading windfall profits taxes?

I haven’t decided yet if I’m going to vote for Obama, and I am skeptical that my absentee ballot will be counted anyway. Obama might be the first major party candidate that I do vote for. (I guess that means I’m growing up?) My biggest concern is that an Obama administration would create new disasters by increasing spending without cutting programs. Where will the money come from? The richest Americans and most successful corporations are very wealthy, but they can’t make up the difference for all these proposed projects. The middle class and small businesses will have to pay too unless government is reduced and funds are re-allocated. Obama has given little indication that this is part of the plan. I don’t think we can count on redirecting money from a draw down in Iraq to domestic challenges. It seems that our war spending will remain constant as we redirect resources from Iraq to Afghanistan. In fact, I would not be surprised if we are talking about the money America spends on war twenty years from now. The theater changes, but the war goes on. With so much money being made by the manufactures of war supplies, why would the war ever stop?

The best thing Obama could do to prove he was serious about his plan, and I think the only possible way to accomplish all these projects, is to go on the record and say that he will not spend any time in the White House seeking re-election. If there’s any hope of implementing his plan for change, it will require a sustained effort of four years. It’s a stretch to imagine even three of his proposals passing in the first 100 days.

Please tell me, where is the light at the end of the tunnel? My wife and I are doing all right in Thailand for the moment, living comfortably on $500 a month for the both of us, but I’m nervous about what our country is going to look like when we return next fall.

In order to have all the programs Obama talks about, I reckon we will have to accept our place in a post-zenith America with real tax rates approaching 50% to match the programs of our socialist European friends. I hate to say it, but I don’t see Obama pulling us out of this mess while preserving America as we knew it. He seems almost desperate, though cool-headed in his delivery, to provide answers. In the absence of any other reasonable-looking person, we grasp at Obama’s solutions like straws.

3 Comments

  1. meister wrote:

    what about voting for Robert or Susan Sturgis??? lol

    Thursday, September 18, 2008 at 6:44 pm | Permalink
  2. James Sligh wrote:

    Roman,

    re: Economic crisis. My father called me a few nights ago and said, essentially: Pay attention. What you’re looking at here is historic.

    The federal government has never in the history of the United States proposed an intervention in the financial markets this large. For the Dow Jones to drop despite this news is an indication of just how bad things are. That’s, as my dad said, “the macro view.”

    A smaller data point: Sligh Furniture Co, the family furniture business, has a certain amount in equity, and a smaller amount (about 1/5 to 1/6 of that) in debt. The debt’s interest is pegged at 2% above something called the LIBOR index, or Londer InterBank Offered Rate, which is basically an index of the average interest rate of banks lending to each other.

    The night that my father had called me, banks were no longer lending to each other at all – for the first time since the Great Depression. And the LIBOR index, which had remained more or less stable for its entire history (50 years), had jumped more than 300%.

    Little indications in the flood of data we have to sift through.

    I’m not optimistic either.

    Jim

    Monday, September 22, 2008 at 4:36 pm | Permalink
  3. Rev wrote:

    Agree on Obama. To simply listen to him speak is incredible; a fantastic orator indeed. The problem is I’ve been a conservative, small-government man my entire life. Although he speaks with hope, change, etc. that specific ‘hope’ and ‘change’ he wants goes fundamentally against my own beliefs. I guess it’s easier for me to get frustrated at him because of his liberal policies than McCain (even though there are just as many issues with that old man).
    Your proposals seem sound – am glad to see people are starting to wake up and realize biofuels are not the answer. I found that the amount of corn it takes to create one full tank of ethanol for a large SUV is the exact same amount of corn it would take to feed one person for an ENTIRE YEAR.
    As far as Jim, that’s the real problem in America. We’re all fussing and fighting for people (who don’t work) to continue receiving entitlement program funding and even increase it with healthcare, etc. and yet those people that own small businesses (ones still attaining the American Dream, not the American Promise that Obama wants) are the ones getting hammered. Not good for America my friend. Not good at all.

    Enjoying the blogs,

    Rev

    Wednesday, October 29, 2008 at 9:21 am | Permalink

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