I confess that I have been peddling a lot of doom and gloom about the fiscal problems facing the Federal Government and most of the state governments. I don't think I was wrong to do so, but it's time to look at the brighter side of the ledger.
Daniel Drezner's blog at Foreign Policy is a little ray of sunshine. He presents three pieces of good news about the United States economic situation. First, and perhaps most interesting, concerns energy security. Drezner directs our attention to Richard Wachman's article in the British Guardian.
Growth in shale oil and gas supplies, along with other fuel sources, will make the western hemisphere virtually self-sufficient in energy by 2030, according to a BP summary published as an overview accompanying BP's latest energy outlook.
In a development with enormous geopolitical implications, a large swath of the world taking in North and South America would see its dependence on oil imports from potentially volatile countries in the Middle East and elsewhere disappear, BP said, although Britain and western Europe would still need Gulf supplies.
Cory Heidelberger celebrates this on his blog because he thinks it serves his great animosity against the Keystone XL pipeline. See! We don't need Keystone! I note that the BP study includes shale oil among the reasons that North America is moving toward energy sufficiency. Cory is still worried that our oil might go to those Godless communists in China. I will point out once again that refining oil here and selling it abroad when we don't need it hear makes the U.S. richer, which is a very good thing. Producing and selling a surplus is how nations, corporations, and individuals prosper. On this subject, Cory is invincibly ignorant.
Second, Drezner points out that American manufacturing is poised for a rebound. Productivity, which is the prime source of wealth, has been steadily improving and unit costs of labor have declined.
As Michael Beckley points out in a new article in International Security, "The United States is not in decline; in fact, it is now wealthier, more innovative, and more militarily powerful compared to China than it was in 1991."
That should cheer Cory up.
Finally, the United States is doing a better job of deleveraging (that is, reducing debt) than most of the other developed economies. Powerline fleshes out some of the implications of a McKinsey Global Institute report that Drezner discusses.
McKinsey Global Institute has produced an interesting report on international debt and deleveraging. It finds that a few of the world's largest economies, including the U.S., have made significant progress in reducing debt since the second quarter of 2008, while others, mostly in the EU, have continued amassing more debt.
What the McKinsey study shows is that U.S. financial institutions, non-financial corporations, and households, have succeeded in substantial reductions in debt. That is very good news as these are the sources of wealth for all private and public enterprises.
Energy security, resurgent manufacturing, and reductions in private debt, make for a pretty picture. This means that the U.S. continues to be, not only the largest, but also the most flexible, responsive, and productive economy on the globe. That means that we will probably be able to solve our most serious problem.
When you add in the enormous fiscal difficulties facing our entitlement system, public institutions are not deleveraging. Federal and state governments are still on the road to fiscal insolvency. Here is a quote from a very long memo produced by Larry Summers for President-elect Barack Obama in December, 2008. From James Pethokoukis's blog at the American Enterprise Institute:
Closing the gap between what the campaign proposed and the estimates of the campaign offsets would require scaling back proposals by about $100 billion annually or adding new offsets totaling the same. Even this, however, would leave an average deficit over the next decade that would be worse than any post-World War II decade. This would be entirely unsustainable and could cause serious economic problems in the both the short run and the long run.
Four years ago Obama was warned by the soon to be head of his National Economic Council that the national debt was growing out of control. He has made not a single serious attempt to address the problem. The same can be said of the Democrats in Congress. Tomorrow marks the 1,000th day since the U.S. Senate has produced a budget.
The United States of America continues to be the most successful regime in recorded history. Our people and our institutions continue to show that the Founder's work was sound. We can only wait for Congress and the White House, perhaps under new management, to bring up the rear.