The United States Congress has found itself in a relatively precarious position, the world outside of Washington, DC cares about what its doing and its actions (or inactions) will immediately effect the United States, in fact they already have.
Yesterday, U.S. financial markets dropped precipitously with the Dow sinking 372 points, the nation saw the end of the two-decade old investment banking era in the U.S and Japanese investors agreed to buy up to a $9 billion dollar stake in Morgan Stanley.
As a result of these events, the surprisingly resilient dollar reached a breaking point and nosedived in value causing oil to surge to $120.92 a barrel, the largest such jump in recent history. This chain of events has solidified the fact that the U.S. is facing the hard realities of a recession.
At the root of our economic problems lie two major concerns. Credit is nearly non-existent due to the financial market meltdown thus reducing investment opportunities and the dollar's purchasing power has declined greatly, making available capital less potent.
The fact that Congress needs to approve this $700 billion bailout now appears to be a foregone conclusion. Un-wise investments that began as private risks are now finding themselves as unwieldy public debt loaded on the back of the American taxpayer.
Congress can begin by preemptively absorbing the $700 billion estimated in bad debt that is "toxic" to our nation's markets. The Congress is correct in assuring this needs to be done with strong oversight to ensure the debt being absorbed is the correct debt to be absorbing. Further, the plan needs continued oversight to ensure this newly acquired government debt is worked to provide the highest possible value in the long-term, providing much-needed cover to the American taxpayer.
One thing we must also remember is that the passage of this rescue plan is not the final chapter in this saga, rather it is merely the beginning. The devaluation of the dollar and its correlation to surging oil prices makes it clear we need to reduce our dependence on foreign oil.
We use approximately 20.68 billion barrels of oil a day of which approximately 12 billion barrels are imported from foreign sources. Knowing this information, and the effects continued dependence will have on our economy, it is irresponsible to not advocate for responsible diversification of our energy supply combined with incentives for businesses and individuals to reduce their daily consumption.
On the supply side, we should expand our use of current natural gas supplies as new technologies have made previous unreachable reserves accessible. The Marcellus shale in Pennsylvania, the Barnett shale in Texas and the New Albany shale in the Illinois Basin in southwest Indiana serve as a few examples of what has become accessible in recent years. Natural gas. and more accurately Liquefied Natural Gas, is not the answer but in the short -term, as T. Boone Pickens is quick to point out, it could be the new diesel. We should also rework the renewable fuels standard to continue to supply ethanol in reliable amounts , but at levels that do not provide instability to domestic food markets.
We also need to increase the use of additional abundant renewable resources. The U.S. has a plethora of wind resources in major areas such as the Great Plains from northwestern Texas and eastern New Mexico northward to Montana, North Dakota, and western Minnesota. Congress should authorize the development of sustainable class 5 wind resources in North Dakota, Montana, Minnesota, Nebraska and other areas in the great-plains and begin offering incentives for the creation of these fields immediately. It should also include increased incentives for solar technologies keeping this energy source available and affordable for both industrial and residential consumers. These steps would not only serve to create new energy supplies, but would also create new jobs and new sources of revenue for an ailing economy.
At the same time, we need to continue our current efforts toward increased energy efficiencies. However, we need to turn our focus to increased efficiencies on an industrial level as two-thirds of our energy consumption is consumed by power producers and providers and other industrial users. When Congress returns from the 2008 elections, fresh with a mandate of change of some sort, they should pass incentives for power producers and providers and major industrial sources to decrease their energy uses significantly over the next ten to fifteen years through tax rebates and other incentives. These short term measures could be a great place to start in what seems to be a vexing transformational landscape.
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