During the week ended June 27, oil prices hit a record high of $142 per barrel. With the continual increase in energy prices over the last two years, the question echoing through the halls of Congress these days is, “Who is to blame for high gas prices?” In typical Washington-knee-jerk-reaction-because-it’s-an-election-year fashion, Congress is looking everywhere for the evil culprit to punish so that the voters will feel like something has been done to alleviate consumer pain. Unfortunately, this type of short-term thinking is what got us here in the first place.
Instead of pursuing increased domestic fossil fuel, or providing incentives for Detroit to adhere to higher fuel efficiency standards, political authorities have tried to ignore issues related to energy policy until a crisis has reared its ugly head. Now, the failure to focus on sound policy is threatening our economic stability for years to come.
Because of the economic effect of rising oil prices, policy makers are hard-pressed to find a quick fix and one group that is getting thrown under the bus is “Speculators.” As if they were the mustachioed villain tying the damsel to the railroad tracks, some in Congress and the media have pointed out this group of commodity investors as a major influencer of oil prices. The thought is that these investors are bidding up oil prices by buying financial instruments based on the anticipated future price of oil. While these instruments do have some effect on commodity prices, to regulate these players out of the market would create an even more disastrous situation in which there was increased volatility in the price of commodities such as oil.
There is no doubt that the price of oil has had a significant negative effect on the U.S. economy. There seems to be little understanding in Washington though of the interlocking relationship between the value of the U.S. Dollar and the price of oil. As the prospect of a weaker U.S. economy is reflected in a declining Dollar, the price of Dollar-denominated oil goes up. As oil producing nations get paid in Dollars that are worth progressively less, they raise the price of the oil to offset the decline in value. Stemming the decline in the Dollar would have an immediate effect in stabilizing and lowering the price of oil.
The unfortunate truth in the Dollar’s decline is that it reflects the economic viewpoint of the world that our economy is relatively weaker and a major driver of this viewpoint is our national debt. As long as we continue to borrow from the rest of the world (ironically; in increasing amounts from oil producers like Saudi Arabia) to fund our government and its tendency toward legislative consumerism (increased spending to make all the constituents happy), our Dollar will continue to decline. As we approach the tipping point of baby-boomers collecting from welfare programs, the problem will only deepen. As a result, we will continue to see rising oil prices and an ongoing threat to our economy and our way of life unless our political leaders get the will to make the difficult decisions to stop spending frivolously and reform entitlement programs.
It is easy to find the election year boogie-man on Wall Street, but if our Congress would like to see who is at fault for higher oil prices, they should start by looking in the mirror.
Saturday, June 28, 2008
Monday, June 16, 2008
What's spending got to do with it?
When the Republican Party lost the majority in Congress in 2006, Senator Lindsey Graham was reported to have said that Republicans lost because, “We had been spending like drunken sailors.” The problem is actually much deeper. The Republican Congress had failed to do what they said they would do which was reduce the size of government and be more efficient with the taxpayers’ funds. Republicans had lost the mantle of “the conservative party,” and it seemed that the phrase was even more an oxymoron than originally thought.
A friend of mine, Josh Gross, who is a political consultant, and I were recently discussing the relative merits of politicians we know. Josh commented that one politician in particular was “strong on defense, but weak on spending.” I retorted that spending is a national security issue. As our nation borrows increasing amounts from foreign governments that are not necessarily friendly to our interests (i.e. China and Saudi Arabia), we endanger our ability to exert influence in the world. As I told Josh, “No one picks a fight with their bankers.”
Both mainline political parties are to blame for the current economic conundrum. Neither party has been willing to ask for sacrifice and restraint on spending. Instead, Congressional earmarks continue to proliferate. Recently, Senator Jim Demint authored a budget amendment that would have instituted a one-year moratorium on Congressional earmarks and the amendment was defeated with 71 “nay” votes in the Senate. Remarkably, all three Presidential contenders (Senators McCain, Clinton and Obama) voted in favor of the moratorium. It seems that their collective support indicates that no one running for national office would want to be seen as a spendthrift even as appropriators in Congress see it as the path to reelection. The defeat of such an amendment also shows the lack of willpower in the Congress to go home and tell voters that pork barrel projects will have to wait given that we are trying to fund a war. (Of note; in South Carolina we aren’t funding any wars but our General Assembly is no more inclined to spend the people’s money wisely.)
Given the comment I have attributed to Todd Long in my entry on May 21 that “a politician thinks about the next election while a statesman thinks about the next generation,” it is clear that the rationale for votes against the earmark reform measures constitutes the politician’s mindset and not the statesman’s. In 2003, the Federal Budget exceeded $20,000 per household for the first time. Most would suspect that the growth in budget expenditures was related to the post 9/11 efforts in war and homeland security spending. In fact, as these programs grew, there were no offsetting cuts in discretionary domestic spending. According to the Heritage Foundation, "non-defense discretionary spending has grown 55 percent under President Bush." Earmark items grew in the same period. Sadly, these increases are in spite of the fact that our nation is in a war that has budget implications of its own.
As if the size in spending per household weren’t enough of a bitter pill, in 2003, the U.S. Treasury collected less than $17,000 per household. This deficit has continued in the following years as well. In fact, we’re all receiving “stimulus checks” from the Treasury to encourage us to spend money when we’re already in the hole fiscally. So, where do we get the difference? Since 2001, borrowing from foreign lenders to fund the deficit has also grown at annually increasing proportions. As the “boomer” generation moves into collection mode on welfare programs, these deficits are likely to increase. Will we see any offsetting cuts in federal spending to fund these programs even though we haven’t sacrificed domestic spending to date for the current war?
While we borrow from foreign lenders to fund our legislative consumerism, confidence in our future economic viability erodes, our currency’s value declines, and energy resources denominated in dollars increase in price.
As we examine the world stage and our national security, our nation and its leaders must understand that prudent fiscal policy is strong foreign policy.
A friend of mine, Josh Gross, who is a political consultant, and I were recently discussing the relative merits of politicians we know. Josh commented that one politician in particular was “strong on defense, but weak on spending.” I retorted that spending is a national security issue. As our nation borrows increasing amounts from foreign governments that are not necessarily friendly to our interests (i.e. China and Saudi Arabia), we endanger our ability to exert influence in the world. As I told Josh, “No one picks a fight with their bankers.”
Both mainline political parties are to blame for the current economic conundrum. Neither party has been willing to ask for sacrifice and restraint on spending. Instead, Congressional earmarks continue to proliferate. Recently, Senator Jim Demint authored a budget amendment that would have instituted a one-year moratorium on Congressional earmarks and the amendment was defeated with 71 “nay” votes in the Senate. Remarkably, all three Presidential contenders (Senators McCain, Clinton and Obama) voted in favor of the moratorium. It seems that their collective support indicates that no one running for national office would want to be seen as a spendthrift even as appropriators in Congress see it as the path to reelection. The defeat of such an amendment also shows the lack of willpower in the Congress to go home and tell voters that pork barrel projects will have to wait given that we are trying to fund a war. (Of note; in South Carolina we aren’t funding any wars but our General Assembly is no more inclined to spend the people’s money wisely.)
Given the comment I have attributed to Todd Long in my entry on May 21 that “a politician thinks about the next election while a statesman thinks about the next generation,” it is clear that the rationale for votes against the earmark reform measures constitutes the politician’s mindset and not the statesman’s. In 2003, the Federal Budget exceeded $20,000 per household for the first time. Most would suspect that the growth in budget expenditures was related to the post 9/11 efforts in war and homeland security spending. In fact, as these programs grew, there were no offsetting cuts in discretionary domestic spending. According to the Heritage Foundation, "non-defense discretionary spending has grown 55 percent under President Bush." Earmark items grew in the same period. Sadly, these increases are in spite of the fact that our nation is in a war that has budget implications of its own.
As if the size in spending per household weren’t enough of a bitter pill, in 2003, the U.S. Treasury collected less than $17,000 per household. This deficit has continued in the following years as well. In fact, we’re all receiving “stimulus checks” from the Treasury to encourage us to spend money when we’re already in the hole fiscally. So, where do we get the difference? Since 2001, borrowing from foreign lenders to fund the deficit has also grown at annually increasing proportions. As the “boomer” generation moves into collection mode on welfare programs, these deficits are likely to increase. Will we see any offsetting cuts in federal spending to fund these programs even though we haven’t sacrificed domestic spending to date for the current war?
While we borrow from foreign lenders to fund our legislative consumerism, confidence in our future economic viability erodes, our currency’s value declines, and energy resources denominated in dollars increase in price.
As we examine the world stage and our national security, our nation and its leaders must understand that prudent fiscal policy is strong foreign policy.
Thursday, June 5, 2008
The "Civic Mindset"
Recently I had the opportunity to spend a Saturday morning near Beaufort, SC with 150 or so other gentlemen thinking about the future of the conservative movement. I left feeling hopeful that there were changes afoot that would allow for a greater sense of stewardship in the cultural mindset.
Among the speakers at this gathering was Roy Williams (not the basketball coach at UNC or NFL player). Although he may disagree with my description, Mr. Williams is a marketing consultant to businesses large and small on trends, branding and the way customers think about buying decisions.
So what, I asked, does this have to do with conservatism? He explained that, in a pendulum fashion, societies swing from a “civic” cultural mindset to an “individualist” cultural mindset and back over the span of an 80-year cycle. He commented that in popular music and literature these cultural shifts were evident. His thought was that we have recently seen the height of the individualist movement in the 1990’s for that cycle and that we have begun to swing back to a civic mindset. The last height of the civic mindset was the 1930’s in which government was tasked with solving all the social ills of the day. In that decade, we saw the modern social programs and large government institutions come into existence. In that phase of the cycle, there was a societal push to rally around a common cause and sacrifice the individual pursuit for the good of the nation.
Mr. Williams stated that if we are indeed moving into a societal phase of civic mindset, the people are more likely to elect leaders who are “open, natural and uncontrived.” The Barack Obama phenomenon makes sense in light of this. Is there a chance that conservatives can find a similar candidate who conveys a genuine sense of conviction about the future of the nation? As Mr. Williams said, “In the civic generation, leaders are more likely to be elected if they are seen as nonpartisan thinkers rather than partisan ideologues.” As conservatives, we should find such leaders or be prepared to lose the civic movement to eloquent speakers who believe that government is the answer.
South Carolina Governor Mark Sanford posed a concern at the conclusion that the civic movement may mean that we see even larger government as the people look for government to solve their issues. My hope is that precisely the opposite will occur; that people will make civic sacrifices for the good of the nation. Programs that were originally part of the civic mindset have now become servants to the individualistic mindset’s chant, “Forget everyone else, I want mine.” Since bigger government hasn’t delivered long-term solutions, conservatives should lead from the perspective that the civic movement will mean reductions in government by a people who are willing to sacrifice the government program that benefits themselves in order to preserve the blessings of Liberty for posterity.
Among the speakers at this gathering was Roy Williams (not the basketball coach at UNC or NFL player). Although he may disagree with my description, Mr. Williams is a marketing consultant to businesses large and small on trends, branding and the way customers think about buying decisions.
So what, I asked, does this have to do with conservatism? He explained that, in a pendulum fashion, societies swing from a “civic” cultural mindset to an “individualist” cultural mindset and back over the span of an 80-year cycle. He commented that in popular music and literature these cultural shifts were evident. His thought was that we have recently seen the height of the individualist movement in the 1990’s for that cycle and that we have begun to swing back to a civic mindset. The last height of the civic mindset was the 1930’s in which government was tasked with solving all the social ills of the day. In that decade, we saw the modern social programs and large government institutions come into existence. In that phase of the cycle, there was a societal push to rally around a common cause and sacrifice the individual pursuit for the good of the nation.
Mr. Williams stated that if we are indeed moving into a societal phase of civic mindset, the people are more likely to elect leaders who are “open, natural and uncontrived.” The Barack Obama phenomenon makes sense in light of this. Is there a chance that conservatives can find a similar candidate who conveys a genuine sense of conviction about the future of the nation? As Mr. Williams said, “In the civic generation, leaders are more likely to be elected if they are seen as nonpartisan thinkers rather than partisan ideologues.” As conservatives, we should find such leaders or be prepared to lose the civic movement to eloquent speakers who believe that government is the answer.
South Carolina Governor Mark Sanford posed a concern at the conclusion that the civic movement may mean that we see even larger government as the people look for government to solve their issues. My hope is that precisely the opposite will occur; that people will make civic sacrifices for the good of the nation. Programs that were originally part of the civic mindset have now become servants to the individualistic mindset’s chant, “Forget everyone else, I want mine.” Since bigger government hasn’t delivered long-term solutions, conservatives should lead from the perspective that the civic movement will mean reductions in government by a people who are willing to sacrifice the government program that benefits themselves in order to preserve the blessings of Liberty for posterity.
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