Economic and Energy crisis, the real 3 a.m. call for Obama and McCain.

Lehman Brothers fails today. Falling values for homes continues to affect financial institutions all across the country. The real truth is that the crisis in the economy and the energy crisis are really one and the same. As the price of energy, and everything else has soared, this has a ripple effect throughout the entire economy. Gas cost more, so you have less to spend on other things and all the people that work in the stores that sold you those things now have a lower income. They therefore cannot afford to buy things, like houses, and on and on down the line. Plus the cost of everything that you have to buy goes up. Everything in every store you ever visited got there by truck. Any energy prices are causing the cost of driving a truck to go up. There is an underlying energy cost in virtually every single product that you buy, be it houses, electronics or food. Farmers had to buy gas to plow their fields, plant their seeds, harvest the crops, and transport the crops to market and on and on.

The underlying economic problem in this country for quite some time is the very simple fact that we import more than we export. You can relate how this works to a household budget. Your imports are the amount that you spend your exports are the amount of income you earn and if you continuously spend more than you earn, you're not going to end up doing very well economically. For years, the biggest factor in our trade deficit has been the importation of oil. Decades ago when oil was cheaper, we decided to make a trade-off. That trade off was a willingness to spend money to import oil and produce less domestically, because it was dirty. The oil spills off the Gulf coasts and off the coast of California were an annoying problem for anyone who went to the beach. I am old enough to remember visiting the beach as a youngster, and at the steps of every hotel along the beach there was basically some rags in a bucket of kerosene or some similar solvent to clean your off the bottom of your feet so you wouldn't track oil back into the hotel. The technology has greatly advanced. Offshore wells now have shut off valves below the seafloor. They close automatically in an emergency to prevent large quantities of oil from leaking into the sea. As a side note, 80% of all the oil on the earth that’s ever been formed has already leaked to the surface. The amount of oil spilled into the ocean today by man is only a tiny fraction of natural leakage of oil. Oil is lighter than water or rock, and after enough rock builds up over the top of it, it gets squeezed and the pressure goes up. If there are any fissures or cracks in the rock, it rises to the surface. Bacteria consume it and it becomes part of the food chain. After all, crude oil is pure organic material; it only causes problems in high concentrations, like a major oil spill. There have been no major oil spills off the coasts as a result of offshore drilling in many years.

And most importantly, the economics of our decision to import oil instead of producing it domestically has changed. At current world prices, and especially their peak price reached a few months ago, we are spending hundreds and hundreds of billions of dollars to import oil. The cost of the Iraq war is also an economic drain but the economic drain of the Iraq war is only about 20 or 30% of the economic drain of importing oil. In 1973, the Arab oil embargo caused a similar economic crisis in our country. Of course the obvious effects were the gas lines and the increased price of filling up your car at the pump. But our entire economy suffered greatly. Inflation soared and jobs were lost. Pretty much the same thing that we're experiencing right now. It was because of the ripple effects of energy prices, which is an underlying cost to produce virtually everything we eat or use in our daily lives. This is somewhat mitigated however, if the energy that we are paying increased prices for comes from inside the US. Because the net wealth stays inside our country, increased income from producers of oil is used to purchase goods, products and services that everyone else depends on for their income. If the money flows outside of the United States it is a net loss of wealth.

Earlier this year, when the price of energy soared, that was the 3 a.m. wake-up call. It should have been easily foreseen by Obama and McCain and everyone else that the ripple effects of virtually doubling of energy prices would have throughout the economy. The fallout was going to be brutal and widespread. McCain reversed his earlier position, and the position of pretty much everyone else, and said it was time to open up the outer continental shelf, but not ANWR, for drilling. He made it part of the way but didn't really propose an all-out plan to increase production. Obama came out against offshore drilling. It's McCain that got a grade of “incomplete” and Obama, a grade of complete failure.

The real solution to both the energy and related economic crisis is to become energy independent. Either Obama or McCain could have said the following statement and passed their 3 a.m. test:

“We are in a national emergency. We must become energy independent. This emergency requires the concerted efforts of our most creative and hard-working people all across the country. We need to greatly increase our investments in alternative energy sources, especially carbon free sources, like nuclear, wind and solar. But we also must realize that the time has come to explore every resource we have available to us. We need to produce every additional alternative energy source we can produce, and we need to extract every last barrel of oil and cubic foot of natural gas on American soil that we can find in an environmentally sound way. And we need to do it very quickly. We are out of time.”

The question of course is which candidate will figure this out, and will they figure it out before it's too late.

Also see:
Obama vs McCain, who is really more of the same?
Democrats blocked Bush’s Fannie Mae and Freddie Mac Reforms.
Democrats created Fannie Mae and Freddie Mac mess then stopped reforms.

John McCain to support drilling in ANWR, biggest news from Palin/Gipson interview

John McCain to support drilling in ANWR, the biggest news from the Sarah Palin interview with Charlie Gipson.

The world watched with bated breath awaiting Sarah Palin’s first big interview with the mainstream media. There were no huge surprises in this interview; she performed well by most accounts, not brilliantly but very well for someone in her position in their first big interview. Some of the questions that Charles Gibson asked seemed to be to set up traps for her, as any good reporter would. The nearest she came to a gaff was when he asked her about the Bush doctrine. But, the Bush doctrine means different things to different people. It can mean a preemptive war, it can mean democratization of dictatorships to lessen the chance of war in the future, or it can mean that people who give comfort and support to terrorists should be judged and dealt with the same as the terrorists would be. Sarah Palin then asked Charlie Gibson, what exactly he meant by the Bush doctrine, asking him to be more specific. And again he tried to trap her by instead of answering; he said “well, what does the Bush doctrine mean to you?” She then went on to explained her view of what Bush's policies had been and also her view of some of the mistakes he had made. Sort of a gaff, but maybe not.

Charlie Gibson then pushed her on points of disagreements with John McCain. But keep in mind, and this is very important, during the Democratic primary debates, Joe Biden and Obama disagreed a lot.. So it may turn out that Sarah Phelan was in fact ready to be interviewed all along on what she thought. However, it is the vice president's job to support the presidential candidate's positions. Joe Biden will support the positions of Obama, even know some of those positions he argued about during the debates. That's just the way the system works, the vice president supports the president. So, what she may have been going through for the last few days was not someone coaching her on how to answer questions or how to speak, but simply a detailed analysis of what John McCain's policies are, because those are the policies that she is supposed to go out and support. She seems to be her own woman, but will generally support McCain’s polices just as Joe Biden will support Obamas, no surprise there. However, I believe that she would push her own in some ways, to get her policies at least hearing with John McCain.

And so the biggest news out of this debate came when Charlie Gibson and Sarah Palin were walking down a lane and he was asking her about areas that she disagreed with John McCain on, and specifically asked her about ANWR. She smiled and said well, that's one of the areas that we disagree on. But the smiling face certainly didn't seem like someone who is being educated on an issue and was about to change her mind. The smile was as someone who is very, very sure of her position and knew it would prevail in the end. Charlie then asked her if ANWR was something they had agreed to disagree on. Sarah Palin laughed and smiled and said yes. She then added this caveat. Smiling even more broadly and more sure of herself, she said, I think we'll all be coming together on this in a week or so. The look on her face was not the look of someone who is about to lose an argument.