We Really Do Not Have Many Options

The single best economic idea to be broadcast recently came from a presidential candidate that has admitted that he does not know a lot about economics. Perhaps that fact alone should tell us something about economics. It ain’t rocket science.

Senator John McCain’s suggestion that the United States Congress reverse direction and permit oil and natural gas drilling and exploration along our own coastline is the best idea even though the effects of such a change in policy may be years away. Like a person badly over weight taking that first step to change their ways and pursue a healthier life style, so too the United States needs to take that first step.

For the last 35 years, since the oil embargo of 1973, the United States government has had its collective head in the sand when it came to a comprehensive energy policy, a policy that would ultimately lead to complete and independent control of our energy needs. But, because politicians in the United States are not held accountable by the people that elect them, little if any progress towards energy independence has been achieved.

A good case can be constructed that we get the government we deserve. Some Americans are happy if they have a drink in their hand and the TV on, while others have no interest at all in what is going on with the economy or public policy. Too few Americans take an interest in what goes on in the area of national economic policy. If you have a pretty face and you have a nice voice, and you run for office enough times, chances are you will eventually get elected. Unfortunately, for the people that are represented, a knowledge of economics is not required. What we are seeing in the United States today are those chickens coming home to roost. As I read one economist put it, the Federal Reserve Bank is in a box. I suggested as much several times in previous postings.

The situation is that interest rates are as low as the Federal Reserve Bank wants to go because of their fear of helping to be responsible for more inflation. With commodity prices running wild around the world, the Fed realizes that to lower key interest rates at this point would only help to fan inflationary pressures. On the other hand, the Fed realizes that our domestic economy is in a very fragile state as a result of our credit crisis, our mortgage problems and the fall off in our housing market. There are many people saying and thinking that the United States is not doing well. Our stock markets and their recent fall is evidence of the problems the economy faces.

But that is where the analogy to a single person ends. The economic life of a country as big as the United States does not just rolls over and dies. What we need to do is attack the one area that can turn our economic future around. Much needs to be done to protect the consumer from businesses that cross over the double-yellow line and present horrendous problems for the rest of us like the credit crisis, the sub-prime mortgage mess or the unregulated greed of hedge funds. The idea that an economy as large as the United States’ economy can be successful for the long term without adequate regulation is just plain stupid in my opinion. Even on our Interstate Highways, I see people driving in the emergency lanes and doing everything they can to circumvent the rules of safe driving. Wall Street is no different, rules need to be enforced and the country needs to adequately fund regulation and enforcement of our security laws. These problems, while not directly tied to the energy problem, has hurt the economy and limited our avenues of recovery.

If we as a nation were dealing with one crisis, the price of oil, our options would be a lot different. For the umpteenth time, the United States must reduce its dependency on foreign oil. Given the amount of imports the United States brings in, and not just from China, and the amount of oil we import, the balance between imports and exports is too far out of line. Add to that the budget deficit the United States is running as a result of our invasion of Iraq and other questionable spending programs spelled pork, and we find ourselves in a very difficult economic situation.

But, we need to start somewhere and the place to start, in my opinion, is for the United States to change our drilling and exploration policy as it applies to our own coast. We need to get control of our own energy needs. This will not necessarily lower the price of oil, but every barrel of oil produced in the United States, is one less barrel of oil that needs to be imported. We are not going to turn this ship of state around on a dime, but we must take that first step. With oil prices where they are today, the continued development of alternative energy sources will remain competitive and should be encouraged by the government.

This shift in our policy of oil and natural gas drilling and exploration is an announcement to the rest of the world that we get it. We, the people of the United States, now realize that we must take responsibility for our own energy needs. We would never out source our need for our defense to the Chinese, so why do we let OPEC have such an influence over our needs for energy?

As I said at the beginning, this isn’t rocket science. Sometimes the best ideas are the most simple and apparent. Our economy can not wait until next year and a new administration. There are no time-outs when it comes to our economy. The clock is running and we need to take action now. I sincerely hope that our Congress with reverse itself and permit the exploration and drilling along our coasts. We need to control the sources of the energy we need and use and begin reducing our dependency on foreign oil. Stay tuned.