Cohen and Krugman

Mr. Cohen has produced a piece titled “American Bull,” and bull____ it surely is.  He says the United States may soon wipe out its need for imported oil and become a major energy exporter, and that this is a seismic geostrategic shift.  He blandly dismisses a major problem thusly:  “First, shale oil and gas production depends on hydraulic fracturing, or fracking, whose environmental impact causes public unease. How far this will slow development is unclear.”  Sweet.  “Causes public unease” is one of the finest understatements I’ve run across.  Prof. Krugman addresses “The G.O.P.’s Existential Crisis” and says this is worth repeating: We’re not having a debt crisis. What we’re having is a political crisis.  Here’s Mr. Cohen:

With the United States running a huge deficit, the incomes of the “99 percent” stalled, the fiscal cliff approaching fast, the nation’s dependence on external financing from China acute, and Washington gridlock a recurrent political condition, this may seem like an odd moment to be bullish on America. But I am.

The main reason is the huge shift already underway in the politics of energy and oil. The change has been underappreciated. It may be summed up in a single sentence buried in the 166-page study [pdf] just published by the U.S. National Intelligence Council: “By 2020, the U.S. could emerge as a major energy exporter.”

That is just eight years away and, yes, you read that right, exporter of energy, not importer. According to the U.S. Energy Information Administration, the United States imports around 8 million barrels of crude oil a day, so the predicted turnabout is dramatic. With those imports, notably those from the Middle East, go forms of political dependency and expediency that have long exacted a price on the United States.

Several developments lie behind this looming geostrategic shift. The first is the advent of shale oil and natural gas production made possible by new technologies. The second is the increase in oil production from deep water offshore operations. Between them, by somewhere between 2020 and 2030, these new sources are expected almost to double U.S. domestic oil production, currently running at between six and seven million barrels a day.

Combine that with improved mileage for cars and a switch in trucking to cheap liquefied natural gas and a once unimaginable scenario becomes reality: The United States wipes out its need for oil imports. Eliminating need, of course, does not necessarily mean eliminating imports completely but it does mean a change in American leverage.

“This is a transformative development,” Amy Myers Jaffe, the executive director of energy and sustainability at the University of California Davis, told me. “We see ourselves increasingly as this weakened country dependent on faraway events. But as we become energy independent our sense of our own power and freedom of movement will change — and with it our foreign policy in ways that are hard to predict. Oil is a different issue when it is not your own problem anymore.”

In other words, think of the world before the first oil shock of 1973 to get some notion of what is afoot.

In the Middle East, the equation switches when China becomes more dependent on a steady oil supply and more concerned on an economic basis about the region than the United States.

Right now, as Jaffe noted, China can operate in the knowledge that Middle Eastern instability costs the United States above all. If the Iran problem festers, for example, so be it. But facing a United States that is energy independent, as its own energy needs and costs rise, Beijing may well be prodded into a different strategic assessment.

Moreover, if oil prices fall over time, which seems plausible, the power and leverage of countries including Iran and Saudi Arabia will be diminished.

Several caveats are in order. First, shale oil and gas production depends on hydraulic fracturing, or fracking, whose environmental impact causes public unease. How far this will slow development is unclear.

Second, the power shift from the West toward the emergent powers of Asia over the next couple of decades is inexorable. So energy independence for the United States is not going to alter its need to operate in an interdependent world devoid of any hegemonic power. Third, countries including Saudi Arabia and Venezuela own large refining operations in the United States; oil ties with them are intricate and unlikely to unravel.

Still, the self-image and economic prospects of an energy independent United States are going to see a sharp uptick. As the National Intelligence Council’s study says, “The prospect of significantly lower energy prices will have significant positive ripple effects for the U.S. economy, encouraging companies to take advantage of lower energy prices to locate or relocate to the U.S.” Already there are significant signs of the relocation of manufacturing industry to the United States, drawn in part by cheap energy. The council estimates as many as 3 million jobs added by 2030.

Jaffe, who recently moved from Texas to California, has noticed another important trend: the rapid coming-together of what she called “App world and the energy world.” This fusion is creating, through innovative technologies, tremendous possibilities in energy saving. Chevron, headquartered in California, has already developed a big energy efficiency business precisely through this symbiosis.

So, if you need consoling, look beyond the cliff a few years to an energy independent United States whose capacity for reinvention is far from exhausted. If that is not enough to lift the clouds, ponder demographic trends. The predicted median age in the United States in 2030 is 39 — against 43 in China, 44 in Russia, 49 in Germany and 52 in Japan.

More people of working age using cheaper energy equals Advantage USA.

Even sweeter.  He ends his piece with the cheery information that all us old fogies will have dropped dead by 2030, so the country WINS!  Here’s Prof. Krugman:

We are not having a debt crisis.

It’s important to make this point, because I keep seeing articles about the “fiscal cliff” that do, in fact, describe it — often in the headline — as a debt crisis. But it isn’t. The U.S. government is having no trouble borrowing to cover its deficit. In fact, its borrowing costs are near historic lows. And even the confrontation over the debt ceiling that looms a few months from now if we do somehow manage to avoid going over the fiscal cliff isn’t really about debt.

No, what we’re having is a political crisis, born of the fact that one of our two great political parties has reached the end of a 30-year road. The modern Republican Party’s grand, radical agenda lies in ruins — but the party doesn’t know how to deal with that failure, and it retains enough power to do immense damage as it strikes out in frustration.

Before I talk about that reality, a word about the current state of budget “negotiations.”

Why the scare quotes? Because these aren’t normal negotiations in which each side presents specific proposals, and horse-trading proceeds until the two sides converge. By all accounts, Republicans have, so far, offered almost no specifics. They claim that they’re willing to raise $800 billion in revenue by closing loopholes, but they refuse to specify which loopholes they would close; they are demanding large cuts in spending, but the specific cuts they have been willing to lay out wouldn’t come close to delivering the savings they demand.

It’s a very peculiar situation. In effect, Republicans are saying to President Obama, “Come up with something that will make us happy.” He is, understandably, not willing to play that game. And so the talks are stuck.

Why won’t the Republicans get specific? Because they don’t know how. The truth is that, when it comes to spending, they’ve been faking it all along — not just in this election, but for decades. Which brings me to the nature of the current G.O.P. crisis.

Since the 1970s, the Republican Party has fallen increasingly under the influence of radical ideologues, whose goal is nothing less than the elimination of the welfare state — that is, the whole legacy of the New Deal and the Great Society. From the beginning, however, these ideologues have had a big problem: The programs they want to kill are very popular. Americans may nod their heads when you attack big government in the abstract, but they strongly support Social Security, Medicare, and even Medicaid. So what’s a radical to do?

The answer, for a long time, has involved two strategies. One is “starve the beast,” the idea of using tax cuts to reduce government revenue, then using the resulting lack of funds to force cuts in popular social programs. Whenever you see some Republican politician piously denouncing federal red ink, always remember that, for decades, the G.O.P. has seen budget deficits as a feature, not a bug.

Arguably more important in conservative thinking, however, was the notion that the G.O.P. could exploit other sources of strength — white resentment, working-class dislike of social change, tough talk on national security — to build overwhelming political dominance, at which point the dismantling of the welfare state could proceed freely. Just eight years ago, Grover Norquist, the antitax activist, looked forward cheerfully to the days when Democrats would be politically neutered: “Any farmer will tell you that certain animals run around and are unpleasant, but when they’ve been fixed, then they are happy and sedate.”

O.K., you see the problem: Democrats didn’t go along with the program, and refused to give up. Worse, from the Republican point of view, all of their party’s sources of strength have turned into weaknesses. Democratic dominance among Hispanics has overshadowed Republican dominance among southern whites; women’s rights have trumped the politics of abortion and antigay sentiment; and guess who finally did get Osama bin Laden.

And look at where we are now in terms of the welfare state: far from killing it, Republicans now have to watch as Mr. Obama implements the biggest expansion of social insurance since the creation of Medicare.

So Republicans have suffered more than an election defeat, they’ve seen the collapse of a decades-long project. And with their grandiose goals now out of reach, they literally have no idea what they want — hence their inability to make specific demands.

It’s a dangerous situation. The G.O.P. is lost and rudderless, bitter and angry, but it still controls the House and, therefore, retains the ability to do a lot of harm, as it lashes out in the death throes of the conservative dream.

Our best hope is that business interests will use their influence to limit the damage. But the odds are that the next few years will be very, very ugly.

The “business interests” are the only thing funding and keeping the Republican party alive.  The odds of them using their influence to limit any damage to anyone other than themselves is approaching zero.


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