It's Been Awhile Since We've Heard From Faber

A NATIONAL POLITICAL BROWNOUT, PART I
by Dr. Marc Faber
Although I don’t always agree with the views of columnist Thomas Friedman, I couldn’t agree more with his criticism of US energy policies. In a recent article entitled "The energy to be serious", he takes Hillary Clinton and John McCain to task for their suggestion that the federal excise tax on gasoline be suspended this summer
According to Friedman, "It is great to see that we Americans finally have some national unity on energy policy. Unfortunately, the unifying idea is so ridiculous, so unworthy of the people aspiring to lead the United States, it takes your breath away.
"Hillary Clinton has decided to line up with John McCain in pushing to suspend the federal excise tax on gasoline, 18.4 cents a gallon, for this summer’s travel season. This is not an energy policy. This is money
laundering: We Americans borrow money from China and ship it to Saudi Arabia and take a little cut for ourselves as it goes through our gas tanks. What a way to build a country."
When the summer is over, we will have increased our debt to China, increased our transfer of wealth to Saudi Arabia and increased our contribution to global warming for our kids to inherit.
No, no, no, we’ll just get the money by taxing Big Oil, says Clinton. Even if we could do that, what a terrible way to spend precious tax dollars – burning it up on the way to the beach rather than on innovation.
The McCain–Clinton gas holiday proposal is a perfect example of what energy expert Peter Schwartz of Global Business Network describes as the true American energy policy today: "Maximize demand, minimize supply and buy the rest from people who hate us the most." ...
Few people know it, but for almost a year now, Congress has been bickering over whether and how to renew the investment tax credit to stimulate investment in solar energy and the production tax credit to encourage investment in wind energy. The bickering has been so poisonous that when Congress passed the 2007 energy bill last December, it failed to extend any stimulus for wind and solar energy production.
Oil and gas kept their credits, but those for wind and solar have been left to expire this December... These credits are critical because they ensure that if oil prices slip back down again – which often happens – investments in wind and solar would still be profitable. That’s how you launch a new energy technology and help it achieve scale, so it can compete without subsidies... It is so alarming, says Rhone Resch, the president of the Solar Energy Industries Association, that the U.S. has reached a point "where the priorities of Congress could become so distorted by politics" that it would turn its back on the next great global industry – clean power – "but that’s exactly what is happening."...

While all the presidential candidates were railing about lost manufacturing jobs in Ohio, no one noticed that America’s premier solar company, First Solar, from Toledo, Ohio, was opening its newest factory in the former East Germany – 540 high-paying engineering jobs – because Germany has created a booming solar market and America has not. [Germany and Japan have, respectively, 20- and 12-year solar incentive programs in place – ed. note.] In 1997, said Resch, America was the leader in solar energy technology, with 40% of global solar production. "Last year we were less than 8% and even most of that was manufacturing for overseas markets."
The McCain–Clinton proposal is a reminder to me that the biggest energy crisis we have in our country today is the energy to be serious – the energy to do big things in a sustained, focused and intelligent way. We are in the midst of a national political brownout.
At about the same time, John Gapper, writing for the Financial Times, lamented the poor state of US infrastructure in an article entitled "On the pot-holed highway to hell":
"If anyone doubts the problems of US infrastructure, I suggest he or she take a flight to John F. Kennedy airport (braving the landing delay), ride a taxi on the pot-holed and congested Brooklyn–Queens Expressway and try to make a mobile phone call en route. That should settle it, particularly for those who have experienced smooth flights, train rides and road travel, and speedy communications networks in, say, Beijing, Paris, or Abu Dhabi recently. The gulf in public and private infrastructure is, to put it mildly, alarming for US competitiveness...
"Faced with the emptying of the Highway Trust Fund, established in 1956 as the US entered a period of growth and prosperity, Mrs. Clinton suggested cutting its source of funds (which she claimed could be made up by a tax on oil companies)... At times I wonder whether the world’s biggest economy has the will to solve its challenges or will end up wandering self indulgently into the minor economic leagues. I expect it will get serious when the crisis is too blatant to ignore, but it has not done so yet.
"Perhaps this is a bit unfair. Some leaders have recognized the problem for economic development, as well as for safety. They include Arnold Schwarzenegger and Ed Rendell, governors of California and Pennsylvania, and Mayor Michael Bloomberg of New York. The trio have allied to press for the states and Washington to act."
Gapper then quoted Ed Rend, incidentally one of Mrs. Clinton’s biggest supporters, who supported her initiative to suspend the "gas tax" and increase taxes on oil companies (a really bad idea, since higher oil company taxes will curtail exploration). "Dams are in a horrible condition ... we have no real rail transport, unlike most nations in the world...
Summer delays make flying in America a disaster," Rendell said.
According to Gapper, "...there are lots of ways in which infrastructure inadequacy matters to the US but I would focus on two.
"First it imposes a drag on economic growth. The private infrastructure is poor enough – broadband speed lags behind other countries and mobile coverage is spotty. But much of the public infrastructure is unfit, a fact that was becoming clear even before Hurricane Katrina flooded New Orleans and a Minneapolis bridge collapsed during rush hour last year.
"Second, it presents an awful image of the US to investors and other visitors. The state of transport and communication infrastructure is a symbol of a nation’s economic development and the US is starting to look like a third world country. In fact, scratch that. Many developing countries look and feel better. Of course they are in a different phase of development. The US invested 10% of its federal non-military budget in infrastructure in the 1950s and 1960s as it built the interstate highway system – at the time, the envy of the world. While the US investment has fallen to less than 1% of gross domestic product, China has been matching its double-digit postwar record... Americans may not like the sound of that, but they cannot expect the US to maintain the economic dynamism of the late 20th century in the 21st unless they buckle down. Sooner or later, wishful thinking is going to crash into financial reality."
In a column for the New York Times, Thomas Friedman noted that Americans really "want to do nationbuilding" – not in Iraq and Afghanistan, but in America.
According to Friedman, "We are not as powerful as we used to be because over the past three decades, the Asian values of our parents’ generation – work hard, study, save, invest, live within your means – have given way to subprime values: ‘You can have the American dream – a house – with no money down and no payments for two years.’ ...
"A few weeks ago, my wife and I flew from New York’s Kennedy Airport to Singapore. In J.F.K.’s waiting lounge we could barely find a place to sit.
Eighteen hours later, we landed at Singapore’s ultramodern airport, with free Internet portals and children’s play zones throughout. We felt, as we have before, like we had just flown from the Flintstones to the Jetsons.
If all Americans could compare Berlin’s luxurious central train station today with the grimy, decrepit Penn Station in New York City, they would swear we were the ones who lost World War II.
"How could this be? We are a great power. How could we be borrowing money from Singapore? Maybe it’s because Singapore is investing billions of dollars, from its own savings, into infrastructure and scientific research to attract the world’s best talent – including Americans...
"And us? Harvard’s president, Drew Faust, just told a Senate hearing that cutbacks in government research funds were resulting in ‘downsized labs, layoffs of post docs, slipping morale and more conservative science that shies away from the big research questions.’ Today, she added, ‘China, India, Singapore ... have adopted biomedical research and the building of biotechnology clusters as national goals. Suddenly, those who train in America have significant options elsewhere.’"
I have quoted Friedman and Gapper extensively for several reasons. I have been accused of being anti-American, and therefore I wanted to show our readers that there is an increasing body of Americans who are very concerned about their country’s misguided fiscal and monetary policies, which are designed to boost consumption not only of oil, but of everything else as well, at the expense of capital investments, and research and development spending, which are badly needed if the US wants to regain its competitiveness.