May 13, 2011 | Energy Policy, Sustainability + Energy
I play with numbers all the time and understand how one can forget their real meaning. As you tinker with spreadsheets or pull together forecasts, it’s easy to become divorced from reality and forget that the numbers represent real people doing real things.
However, even I am gobsmacked when the 1 is followed by twelve zeros (count ‘em 000,000,000,000), and this amount reflects a negative income stream (politispeak for a loss). Actually the U.S. deficit for this year is projected to be $1.5 trillion (repeat just for this year). The total national debt to which this is contributing is over $14 trillion. That is a very big number. But what amazes me even more is that the government, both Houses and the Administration, do not seem to get it. If any reasonably fiscally responsible company were in this situation, its Board would be insisting on extreme austerity measures. But it is difficult to see anything like that happening – even the CEO’s wife still has her executive jet. There is discussion, but very little action.
What is really at stake?
In a recent presentation at Deloitte, Alan Greenspan said that in his opinion, the current policy of quantitative easing (QE1 and QE2 – I thought initially that these were Cunard cruise liners) and high deficits is extremely risky. He called it “betting the country” with disastrous consequences for the US if it were to default on its debt. This is pretty scary, but what he said next really got my attention. If he were in control, he would remove all subsidies and tax breaks.
Funny – isn’t this what the wind industry has been saying for years? We can easily let go of tax incentives if we keep the field level, and take away those being received by the fossil fuel industries. Even better, make everyone pay for the true cost of their energy production and use, including the clean-up costs. Or, at the very least, shore up environmental regulations so that coal, oil and natural gas incur the costs of their risky behavior, rather than passing them on to the public.
If we do this, not only will we instill parity in the energy markets, but we will also take a big bite out of our deficit and prevent costly environmental disasters from occurring. This is a triple whammy; how often do you get the opportunity to execute one of those!
Reacting to the crisis
Economically, we are in a terrifyingly fragile position where the root causes of our problems are being ignored or put aside. Perhaps no one has the gumption to tackle them. Perhaps some do but they cannot get the necessary support. Or perhaps the full impact of not tackling them is not understood. Our decision makers seem to be in a bubble, divorced from reality. They trust that eventually things will work themselves out. After all, America has been in this situation before. The financial advisors can run the spread sheets to prove that the economy will recover in due course without any more interference. I’m afraid that this may not be the case. Isn’t this what Greece and Portugal hoped for as well? There are too many zeros.
Let’s keep it simple: level the energy playing field, reduce the deficit, and address pollution. It’s a triple whammy we shouldn’t pass up.