As I pointed out in the post below this one, “the economy” cannot be separated from security and foreign policy issues. Security and foreign-policy disasters can easily lead to economic devastation, and voters would do well to bear this in mind.
But in this post, I’d like to talk about the economy per se. This is the first part of a long post; it will be extended within the next couple of days.
I think that an Obama administration, combined with a Democratic-controlled Congress, would do grave and long-lasting damage to the American economy. Several specific points:
1)Energy. The Democrats, and the vast array of “activists” whom they enable, have demonstrated hostility to all practical forms of energy production and distribution. This is not just a matter of oil & gas drilling: as we have discussed many times on this blog, the U.S. electrical system faces a problematic future. There is every likelihood that, under a Democratic administration/Congress:
a)The building of new coal plants would go from “difficult” to “impossible”
b)The building of nuclear plants would continue to be virtually impossible
c)Even the building of new natural-gas-fired plants would be severely delayed by environmental lawsuits and regulatory maneuvering based on the CO2-is-a-pollutant theory.
Solar and wind, beloved of Democrats, have their uses, but they also have their limitations. I see no evidence that either Obama or the Dem Congressional leadership has any interest in understanding the technical and economic factors that govern the extent to which these technologies can be practically employed. The intermitant nature of wind and usable sun, the difficulty of storing electricity, the supply-chain constraints which govern the large-scale introduction of any new technology–there is much less interest in these things than in the glib repetition of catch-phrases. And even the use of environmentally-blessed technologies will be greatly inhibited by environmentalist protests against the transmission lines required to connect these systems to the cities that need their power. These activists would, of course, gain great impetus from a Democratic administration.
Obama talks a lot about the middle class. The existence of a large and affluent middle class is enabled by widely available and reasonably priced energy, especially electricity. If electric rates are driven up by a factor of 2X or 3X, as is entirely possible with Democratic policies, there will be not only a direct effect on consumers, but an effect on virtually all workers as U.S. businesses–especially manufacturing businesses but also things like data centers–become less competitive.
Lenin once remarked that “Communism is Soviet power plus electrification.” Our present “progressives” seem more interested in de-electrification. Where the New Deal (and the Soviets) wanted to build hydroelectric dams, today’s “progressives” are, for the most part, more interested in destroying them.
Remember, electrical infrastructure is a long-leadtime item, and if we dig outselves into a deep hole in this matter, it will take a long, long time to dig ourselves out.
No one should kid themselves that because gasoline prices are on a downtrend at the moment the gas-price problem is solved. Even if economic stagnation in the U.S. persists for a long time, a recovery in the Far East will drive demand–and, absent new supply, prices. Drilling in the U.S. is important not only for gasoline and diesel supplies but for supplies of natural gas–this commodity also comes from wells, and often from the very same wells that produce oil. This is something that Nancy Pelosi, with her apparent belief that natural gas is not a fossil fuel, does not appear to grasp.
2)International Trade. There has been, understandably, a lot of concern about jobs lost to the offshoring of business activities, especially in manufacturing. But it’s important to understand that international trade also creates jobs. If you work at Boeing or Caterpillar, for instance, exports are very important to your employment future–and countries are much more able to buy your products when their economies are thriving. The ability to sell products/services to the U.S. has, of course, been a major factor in the economic success of countries like China and India and their consequent ability to buy jetliners, tractors, and other things from the U.S.
Democrats seem to think that trade is something that Americans do for other countries, kind of like a global welfare system. They tend to underplay trade’s benefits to Americans–the attitude often being “we send our jobs to China and all we get back is cheap t-shirts at Wal-Mart.” The reality is that we get plenty other than cheap t-shirts. What would a PC or laptop cost if all manufacturing (including that of all components) had to be done in the U.S.? I haven’t reviewed any manufacturing bills of material for such products lately, but I’m fairly confident that prices of a domestic-only product would be much higher. The same is true of a wide array of consumer products–there are many things that are broadly affordable to Americans that would, absent imports, be available only to the relatively affluent.
One of the things Obama talks about is using tax policy to punish companies that move jobs offshore. How would this actually work in practice? Consider an example: GE makes CAT scanners and other high-end medical equipment in Milwaukee, as well as in other places. Many of the components that go into these products are sourced from other countries, including China and Mexico. Suppose GE had been effectively required to get all these components domestically, either by making the parts themselves or by acquiring them from domestic suppliers. The finished products would cost much more, and, in international markets, would likely be uncompetitive with similar products made by (for example) Siemens. This would not be good for employment in Milwaukee, or anywhere else in the United States.
Democrats like to talk about working cooperatively with other nations, but this does not seem to be their actual view in the case of trade, as evidenced in the high-handed attitude toward Columbia and in Obama’s comments about NAFTA, which caused considerable dismay in Canada.
I am not a free-trade absolutist–I’m not absolutely opposed to tariffs and other import restriction under all circumstances. I do believe that trade is on balance a net benefit to the U.S. and also to the billions of people throughout the world that it has helped to raise out of poverty. And I’m very concerned that the Democrats’ extreme politicization of trade–to the point of demagogy–threatens to undermine the competitiveness of American business, cost American jobs, raise prices for everyone, and possibly set off a global trade war.
Most economists agree that the Smoot-Hawley tariffs were a major factor in bringing about the Great Depression.
(to be continued)