For the last two plus years, we have watched the private sector of the American economy limp along. Part of that time, the economy was contracting and then it moved into slow and halting growth. Most of the growth in America was concentrated in the government sector. Indeed, Obama has moved the USA towards a status where government spending becomes a major driver of economic growth. Of course, the problem with using government spending to drive economic growth is that it does not work well and that it cannot last for long without resulting in bankruptcy. by its very nature, government spending is inefficient and each dollar actually spent on items that should cause growth results in less if the money is spent by the government rather than by the private sector.
I just listened to Larry Kudlow discuss on his radio show that the GOP needs to have a growth agenda other than just cutting government spending. Kudlow is correct; it is not enough to cut, there has to be an engine of growth that will raise incomes and employment for all Americans. So what can be done?
The first and obvious step to help grow the economy is to lower energy prices and keep more of energy production in domestic hands. We have been hearing about these goals since 1973; yet, we are in worse shape now on this front than at almost any other time. As anyone who reads this blog knows, I am a fan of ramping up production and use of natural gas. The USA has abundant reserves of this fuel, enough to satisfy all of our energy needs for at least a century. The price of natural gas is about 20% the price of an equivalent amount of oil. Natural gas production creates jobs in the USA. None of the money spent on natural gas goes abroad to places like Venezuela, Libya, Iran or other enemies of the USA. The technology to use natural gas is here now; there is no need to do anything other than to convert to existing technology.
Let's look at the effect of shifting our energy use in a small way: One million barrels of imported oil gets shifted to natural gas. This could happen by moving home heating with oil to gas, by moving electrical energy generation from oil to natural gas; by migrating our vehicle fleet from oil use to natural gas and similar steps. Let's look at the effect of this switch. One million barrels a day at $100 per barrel is $100 million dollars that goes each day out of the USA to countries that do not like us very much. If we replace that oil with natural gas, the cost for the fuel would be about $20 million per day. In other words, consumers would save about $80 million per day in the aggregate. That savings comes to about $30 billion per year that can used for other things in the economy. If we use the multiplier that the Obamacrats insist exists in the economy, then this expenditure would result in about $50 billion of additional activity this year and every year thereafter. But that is not all. In order to produce the natural gas, there would have to be jobs created so as to increase the drilling industry, the pipeline industry, the auto industry (those nat gas powered cars have to come from somewhere), and many other places. The wealth of the landowners who have leased out their property for drilling would go up due to royalties. Tax revenues to the state and federal governments would go up as a result of the new jobs and higher incomes. Federal and state expenditures would need to go down as fewer people were unemployed. Simply put, just this switch could add a major push towards growth into the economy. If the move towards natural gas powered vehicles continued year after year, the push towards growth would get larger and larger over time.
A second way to increase economic growth is to make the USA more competitive in the world. while this sounds like a platitude, it is not something being done at the moment. Right now, the USA allows China to manipulate its currency and avoid expenses that we impose upon ourselves like recognition of patents, fair labor standards, environmental controls and the like. Just imagine the effect were the US to levy an entry tax on goods of countries that had lax environmental safeguards in place. In other words, those countries who spew air pollution into the atmosphere suddenly would find their goods made more costly and less competitive. What would happen to China if the socks made in Shanghai suddenly cost more than those from Romania? what happens if electric toothbrushes from Hong Kong cost more than those from Costa Rica or Arizona? The answer is simple. All those folks now investing in China would move their plants elsewhere. Indeed, if the US could get the European Union to follow a similar plan, we would quickly see major changes in the world economy. Indeed, many goods that now are priced out of the market by Chinese competitors would get back the ability to compete.
At the same time that steps were taken to force other countries to meet certain minimal standards, the USA needs to remove those restrictions on our own businesses that are excessive. This is a subject for about twenty other posts, so I am not going into detail here. Suffice to say, that there is much to be done on this front.
Think of it this way: If the USA could have achieved growth of 1.5% more per year during a four year presidential term, that would mean a GDP of about 7 percent higher at the end of the term. While this may not sound like that much, it is more than a trillion dollars. I also means that the government's deficit would decline, unemployment would recede, and personal incomes would go up for all. In short, to use the trite phrase, it is a win-win. this is the message that the GOP needs to push before the 2012 election. Too much depends on it for a mistake to be made now!
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