President Obama is considering naming Ernest J. Moniz as the next Secretary of Energy in apparent recognition that oil and gas development is the best 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. His predecessor, Steven Chu, pushed hard for job killing cap and trade legislation, prohibited resource exploration on federal lands, and wasted billions of dollars on sustainable energy boondoggles.
With public employees panicking over sequestration spending cuts scheduled to begin in early March, the Obama Administration seems poised to triangulate away from their radical environmentalist friends in order to embrace oil and gas and to protect union jobs.
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 occur as projected, the United States will eventually suffer a monumental debt crisis. 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 the debt and spending crisis, Congress raised some taxes last month and set automatic spending cuts, known as sequestration, that become effective next month. The pain is structured to be shared equally between the military and the welfare state, with a 9.7% cut in defense, 7.3% in non-defense, and 2% for Medicare spending.
Anticipating the coming crunch, government spending fell at an annual 6.6% rate last month, driven by a 22.2% decline in defense spending. This subtracted 1.33% from the economy. Vendors to the government cut their rate of inventory accumulation, slashing another 1.27% of GDP. The combination of these factors slowed the economy by 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 controls 1,942,528 “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-day unpaid furlough each year to meet sequestration cuts. The U.S. Army estimates that 78% of its combat brigades will be forced to skip training due to sequester. CBO Director Douglas Elmendorf 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 simultaneously fighting against fracking and other new petroleum drilling innovations. When Chu was appointed four years ago, crude oil hovered around $35 per barrel; today it sits at $95 a barrel. With the shale boom driving huge tax revenues 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 believes that developing low-cost natural gas for electricity is a "bridge fuel" to lower carbon pollution.
In an article titled "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 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, so be it.
CHRISS STREET & PAUL PRESTON present “The American Exceptionalism Radio Talk Show,” streaming live Monday through Friday at 7-10 PM. Click here to listen. Visit our websites: www.aexnn.com & www.agenda21radio.com