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Fiscal Unsustainability
Posted by Glenn on September 27, 2005 - 12:10pm in The Oil Drum: Local
Topic: Policy/Politics
No matter what your politics, I think everyone can agree that our current Federal fiscal situation is untenable. Bush and the Republican Congress took us from a surplus to a deficit mainly because of a massive tax cut that primarily (in dollar terms) benefited the richest Americans while not cutting spending. Then they added ongoing and expensive military operations in two countries by choice (rightly or wrongly). They passed enormous spending bills on Farm Subsidies, Medicare Drug Benefit, Transportation and continued to advocate for making the Bush tax cuts permanent. The President has still not vetoed one spending bill that Congress passed.
Now when we can all agree that we face a disaster of such a magnitude that calls for short term deficit spending to rebuild shattered communities, we find that our credit is already over extended and that we have lost control of our fiscal policy. So now what?
- $2.5 billion cut from Amtrak
- $2.5 billion to Eliminate the Hydrogen Fuel Initiative
- $25 billion cut from the Centers for Disease Control (nothing to do with peak oil, but Bird Flu, hello!)
- $479 million to Eliminate State and Community Grants for Energy Conservation
- $220 million Eliminate the Next Generation of High-Speed Rail
- $6.7 billion to Scale Back the Conservation Security Program
- $5.285 billion to Limit Future Enrollment in the Conservation Reserve Program
- $835 million to Eliminate the Energy Star Program
- $25 billion in earmarked items from the Transportation bill, which includes many good programs to promote biking, ease traffic congestion and in general give people some other options than using their car.
Along the same lines (but specific to New York State), a recent article in the New York Post (Sept 19, now subscription only) identified specific federal allocations in the recently passed Transportation Bill that seemed completely superfluous to the writer. These allocations included:
- $2 million to "enhance Battery Park Bikeway perimeter"
- $3.2 million for "pedestrian walkway and bikeway improvements along the NYC Greenway system in Coney Island"
- $8.25 million "to study, design and construct Brooklyn Waterfront Greenway in Red Hook, Greenpoint and the Navy Yard in Brooklyn"
- Ithaca: $1.2 million to "design and construct pedestrian and bicycle path"
- Bedford: $650,000 for a bike path
- Warwick: $500,000 for a "walking and biking trail"
- Weedsport: $250,000 for a "deer-avoidance system"
- Niagara County: $1.5 million for a "bicycle/pedestrian off-road scenic pathway"
- Owego: $1.25 million to build a "pedestrian waterfront walkway"
- Riverhead: $2.4 million for "bicycle and pedestrian" projects and "safety improvements"
- Elmira: $2 million for "congestion mitigation"
So what do you think Oil Drummers? Are these investments we should put off while we subsidize the oil economy and rich SUV drivers at the expense of our shared future? I invite your thoughts on how we would approach fiscal policy with Peak Oil in mind.
"We're an empire now, and when we act, we create our own reality."
could you send me a list of your fav sites
please get my email from my profile and send
me more links, thanks
or
http://www.google.com/search?hl=en&lr=&q=%22country+ratings%22+standard+poor+fitch+moody
or google ("country ratings" standard poor fitch moody)
There are only 3 credit ratings groups and they are all based in the USA. They will never down-grade the USA rating. They all have a conflict of interest. If they down-grade the USA they will lose money.
The only hope is that the foreign banks and stock markets will start converting reserves into Euros but with USA using its military to keep its currency strong this will not happen.
No goverment (state or fed) will ever balance the budget and no lender (foreign or domestic) will call in its money on the USA. The federal debt will get larger because that is the way the rich people rule the poor.
And it helps the greedy (both Dem and Repub) cut social programs, dismantle social mobility, keep the poor people poor and keep the rich people rich.
To keep the USA curreny strong is it easier to start a war than to raise taxes.
I like to call it quiet classism.
put foreign farmers out of business. Here are
some dumping articles:
http://www.globalpolicy.org/socecon/trade/subsidies/
WTO, world bank and IMF all help keep poor
countires in debt and subservient to the
current power structure. Here is a book about
poor country debt:
http://www.thirdworldtraveler.com/Globalization/Economic_Hit_Man.html
"Meanwhile, sober analysts attempt to look beyond these short-term blips, but do little to reduce uncertainty. Well-regarded authorities say we are exhausting crude oil supplies so rapidly that we are on a route to $200-per-barrel, while equally well-credentialed experts expect renewed exploration activity to drive prices below $40."
Here's the full link:
http://www.weeklystandard.com/Content/Public/Articles/000/000/006/129dzdqn.asp
I read their site - with gritted teeth - on a daily basis, and this is the very first allusion to Peak Oil I have ever seen. Undoubtedly, Matt Simmons book has a lot to do with the recent uncharacteristic flurry of attention Peak Oil has received in the "conservative," business-oriented press.
people of jewish descent who think this whole program is loony as hell fear they may be swept up in a tide of antisemitism if likud jewish participation in the program is exposed. Of course, the likud radicals want to spread fear of antisemitism, since that fear will stampede some into the likud camp.
i dont have to tell you who's behind the weakly standard, their connection to PNAC and the intermarried clan of neocons who infest PNAC, the AEI, JINSA, AIPAC, MEMRI, etc.
Those of us that run this site are not happy with your counter-productive comments. If you don't have something on topic to say, then please keep quiet.
1. In 1995, the U.S. major Conoco signed a major gas production agreement for Iran's giant South Pars field. The condensate from the rich-gas was to be exported and the residue gas reinjected into Conoco's oil production PSA in Oman (which peaked in 1995).
AIPAC immediately lobbied congress to block this win-win-win (for U.S.-Iran-Oman) project because the Iranian government was meanwhile helping Hezbollah fight the Israeli occupation of Southern Lebanon. Not too many Americans cared one way or another about the guerrilla war Israel was engaged in Lebanon. Nevertheless AIPAC succeeded in convincing congress to pass the sanctions act on Iran. Conoco had to pull out. South Pars development was delayed by about 5 years, and Oman's oil production dropped rapidly.
AIPAC didn't stop there. When Mobil wanted to "swap" oil with the reformist Khatami administration of Iran--through an elegant agreement which would have supplied oil from Kazakhstan to Northern Iran oil refineries and taken an equal amount of crude from the Southern Iran oil fields-- again AIPAC-paid congress blocked the deal. So the land-locked Kazakh oil fields never made it to the international markets (just ongoing talk of a pipeline to China).
2. The Iraqi invasion and U.S. occupation was a brain-child of Feith and Wolfowitz, based on input from the Netanyahu administration-- several years before 9/11/01. The oil drum has just posted the link to an LA Times article about how the invasion has hurt Iraqi oil prospects-- so I will not be redundant. The Iraqi invasion was not in the U.S. interest.
Of course Peak Oil will come regardless of our Mid-East foreign policy. But since all geologists agree that Persian Gulf is the last to peak, the fact that we have needlessly screwed up our relationship there is adding to the Peak Oil "fear factor." Many economists are saying that at least $10 of the $60/Bbl oil price is due to tensions in the Persian Gulf region.
For that, AIPAC is responsible. (Just as much as their right-wing allies on radio/cable TV and the fundamentalist Christian churches.)
Clea
and i'm getting really bad vibes about this hurricane stuff, and the rest of it. one of these days, somebody's gonna load that last straw that breaks the camel's back.
will there be some attack horrendous enough to justify martial law and control of the media?
who will cheney scapegoat?
The same scapegoats that the Republicans ever use.
"A discussion of peak oil will lead directly to PNAC and their call for "a new pearl harbor" a year before 9/11."
First, the easy lie. PNAC did not call for a "new pearl harbor." It was a phrase in one of their papers, not a call for an attack.
Second, the implication. Here, the reference is to Griffin's "The New Pearl Harbor", an anti-semitic book stating that the 9/11 attacks were not caused by Saudi terrorists, but by Jews who staged the event to create a "New Pearl Harbor" to get funding for their personal goals.
Finally, the conclusion. If the Jews staged 9/11 and the Jews are just pawns of likud, the only possible solution is to get rid of all the jews in government, becuase they are a fifth column against America's interests.
One wonders why bothering having a cite that requires registration if you don't even use it to knock out the easy cases.
So far, so good has been the motto of the past few years as we have loaded up debt both private, corperate and government. These trends can not continue, and once they change it will become much more difficult to carry forward debt from today, to tommorow.
Judging from just the resent spike in Gold, things are comming unwound in the financial markets quickly. The Dow and S&P both look technically ready to fall. I have no doubt that consequences are comming regardless of what central bankers and economist try to spin on T.V.
Roscoe Bartlett For President
2008? Sounds just about right.
So, should TOD sponsor a "Draft Roscoe" movement?
What about spending on Space projects? Do we really need to see another multi billion project to Mars, the Moon or other planets? Do we need another million dollar particle collider that can smash up sub-atomic particles into even smaller sub-atomic particles? I can't see how any of those projects can help with more urgent problems such as poverty, hunger, disease, education, and now peak-oil! Those things should be put on hold for now. And this is coming from a guy that loves science and astronomy!
Country Standard & Poor's Moody's FITCH-IBCA
Japan AA- (stable) Aaa (stable) AA (stable)
that means our debt can go to about 15 trillion
and could you all be a little more specific on "crsis"
recession and depression are good topics but i am not sure
what you all are saying. crisis for you who and how long? anyone who makes more than $75,000/year should be happy as a clam.
i will upload my excel sheet on income distribution
http://ferret.bls.census.gov/macro/032004/perinc/new11_000.htm
and can we have a poll on what the peak production for HQHC's will be and what year and when the public will find out?
all this crisis talk is silly. the rich are getting richer and the poor are getting poorer. no suprises here. let us say there is a depression and HQHC shortage. just think all those poor americans and go work on farms and generate electricity on stationary bikes. and the new upper class will be even more powerful.
There never was a "End of Cold War" reduction in military spending. Per my brother-in-law, who is actually in service today, "there are more pieces of high-tech shit that don't work than anybody can every imagine, and the low tech stuff is crap from China!"
I know it will never happen - but reducing this single expense would change everything in the finance and geopolitical sectors to something much more sustainable.
Want to know exactly how bad the stock market is doing? Remove energy related stocks and you will quickly see that they are not a "roof" or a "ceiling" for the market, but the only thing holding it up...
Fractional banking now retains just .08 of each dollar in their central vaults. I recently tried to get $5000 from my bank. I was told I would have to "place an order" for that much cash.... credit and lending is not just out of control, it is the only game in town, and every single bank in the world is built of nothing but debt.
The reset of the mythical ever-expanding economy is a massive depression. Every respectable world economist has warned of this over the past few years.
Peak Oil and all the storms and all the other crazy government expenditures going on today are pushing us all closer and closer to the brink. When the stock market finally begins to slide, the banking system will not be far behind.
Damn. THAT is scary.
For all of you non-economists (or non-bankers) out there, this is what is actually going on. When we Americans buy imports, we pay in dollars. The Chinese manufacturer we buy from (for example) exchanges the dollars for yuan at the local bank they use, since dollars are not legal tender in China and cannot be spent there. These dollars find their way to the Bank of China, since the bank can't spend or lend them either.
Now, what can the Bank of China do with dollars? It can only buy dollar denominated assets, or exchange them for currency of other countries. The easiest thing for the Chinesse to do, has been to buy Treasury securities with their surplus dollars.Given our budget deficit, we are borrowing (that is, selling new Treasury Bonds and Treasury Bills) like mad. They can also buy "hard" US assets... including corporations like Unocal (if we don't block them).
The Chinese have every incentive to keep the game going for now, because they use money earned by selling exports to fund economic development. They worry about feeding their people as well. But at some point, if we keep pumping
out dollars... that is... not keeping them valuable by keeping them scarce... everyone will begin to think that they are worth less. Note well, now that the Chinese have set up a currency basket against which they now peg the yuan, the Chinese can take the dollars and buy, Euros, Yen, or whatever else is in the basket, whose composition they keep secret as far as I know. This is a diplomatic way of telling the US that they are beginning to lose confidence in the dollar and that the Chinese will not hold dollars forever.
Economists differ on what happens next (Bradford deLong's blog has been covering this debate). Optimistic economists note that it was relatively painless to coordinate a managed devaluation of the dollar in 1985 following the Plaza Accords.
But in my humble view that was a different world -- US trading partners needed the United States to defend against the USSR, the United States was still the magnet for intellectual talent worldwide(which was the true guarantor of our power in the future). With the rise of other large economies and the fall of the USSR, other countries simply don't need the US the way they used to. Furthermore, there used to be a bedrock competence in the US Government that other countries could count on to get basic things right, no matter who was President. This gave our trading partners a basic faith and confidence in the United States That is no longer true and Katrina has exposed this if Iraq had not already done so.
In my view if we do not change our ways we could repeat Argentine history. As some of you might know, Argentina was considered one of the top 5 world powers in the 1920s, but they took their assets for granted. I believe it CAN happen here.
Back to the political situation. Bush believes in small government and would love to use Katrina relief expenditures to eliminate as much nonmilitary spending as possible. He has believed that Government is "the enemy" and welcoms large deficits because they would seem to make social spending difficult to fund. This is the "starve the beast" ideology first publicized by Reagan Administration Budget Director David Stockman in his now notorious Atlantic Monthly interview.
Bush has a large majority in both houses of Congress and so there is little check on him... unless the Members get restive under the pressure of falling poll numbers. But even there Bush might try to tough things out. And as the LA Times reported recently (sorry, wish I could find the reference) because so few congressional districts are competitive, it would take a very large shift of public opinion against the Republicans, most likely a 57% majority Democratic vote, to change control of the House.
I personally don't think the things Peakguy listed are pork. We should not, however, undersestimate their chances of elimination.
Recent events have proven the prediction correct. But what other evidence awaits to be uncovered? Paul Krugman, writing in the NY Times says that the Treasury may harbor more incompetence:
Truthout.org
I would imagine, that if FEMA was lead by incompetents, then Treasury is full of them, and it would not surprise me if there are significant money/financial problems within the gov't about which we and the rest of the world will one day be enlightened. And if these problems represent big money, the dollar may collapse.
Yes, Bush has little check on him now, but there are possible events approaching which may force him away from his agenda, much as Katrina has put paid to his privatization of Social Security thrust. They include the Abramhoff kickbacks criminal investigation, the outing of CIA agent Valerie Plame investigation, and other political scandals. But most of all, a falling dollar would be Bush's undoing, resulting in much higher prices for oil (and other commodities). At that point I think Bush would be in check.
The key to this is that the dollar enjoys the perks of being the world's reserve currency. The US can continue this form of hegemony as long as oil priced dollars.
William Clark in Petrodollar Warfare argues that the Iraq war was ultimately started because of the fear of the results of the world moving the price oil euros or at least in both currencies. Considering our huge negative current account problem, dollar hegemony must continue according to the policy planners in the current administration.
The following link is excellent: http://www.ratical.org/ratville/CAH/RRiraqWar.html
Some info on our finacial system...
==AC