Jason Barton

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America’s economy: Hope at last

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Clearly there are many factors to both the Great Recession and our recovery from it–whether that recovery is happening now, or, as some of my smartest buddies believe, will not happen until after a second dip occurs.

Either way, it’s no surprise to this observer that energy is a central issue at the heart of any economic activity.

In addition to the typical energy issues typically discussed on this site, I hope you can forgive the inclusion of macroeconomics included below. It’s important. And interesting. And energy is also certainly related.

The world’s biggest economy has begun a much-needed transition. Barack Obama could do more to help

Mar 31st 2010 | From The Economist print edition

GREAT storms and floods have a way of altering landscapes. Once the waters recede, some of the changes are obvious: uprooted trees, damaged property, wrecked roads. Later come further changes, as people seek to avoid a repeat, erecting new flood walls or rebuilding elsewhere.

As in the physical world, so in the economic one. The financial deluge that broke over America has passed and the recession it caused, the worst since the 1930s, is ebbing. This year the American economy is expected to grow by around 3%, after shrinking by 2.4% in 2009. Rainbow-spotters hope that employment is at last beginning to grow again. And the economy emerging from recession is not the same as the one that went in. There is obvious damage: high unemployment, millions of foreclosed homes and a huge hole in the public finances. Less obviously, a “rebalancing” is under way: from consumption, housing and debt to exports, investment and saving. As our special report this week argues, this is enormously promising for America and the world; but it is far from assured. A lot depends on politicians—and not just the ones in Washington.

[…]

Dearer, scarcer credit is not the only reason. Energy, though not as frighteningly expensive as in 2008, is also no longer cheap. Americans are choosing cars over light trucks, utilities are being told to use more renewable fuel, and domestic deposits of oil and gas locked deep beneath the sea or in dense rock are suddenly profitable to extract. If these trends continue (admittedly, a big if), America could import barely half as much oil in 2025 as seemed likely just five years ago.

[…]

Put crudely, if Americans save more and spend less while other big countries do the opposite, the world economy will prosper. If Americans become thriftier while foreigners fail to spend more, it will stagnate.

[…]

Plenty of microeconomic reforms could also help with rebalancing. America taxes income and investment too much and consumption too little. So far Mr Obama’s policies have mostly worsened the tilt. Health-care reform applies for the first time a payroll tax (for Medicare) to investment income. His administration has rejected a tax linked to the carbon content of fuel. It has also increased the subsidies, guarantees and preferences for mortgages that helped inflate the housing bubble. The federal government now stands behind 60% of residential mortgages and seems open to the idea of creating a permanently expanded backstop.

Read the entire article here.

Written by Jason

April 1st, 2010 at 8:02 am