A good rule of thumb is that when there is consensus on an issue in Washington (or Wall Street), it's probably wrong.
There's a real consensus right now in Washington, even though it doesn't seem like it.
Where's the consensus? That the deficit and debt matters right now and needs cutting. By the above rule of thumb and as is well known to most readers of this site, this is a bad idea. Deficit reduction will not help reduce unemployment.
But what else? Here's what they say on the two sides of the debate (leaving out others like President Obama who are saying similar things):
Whatever cuts we need to make, we have to do so in a way that does not harm our economic growth.
-- Nancy Pelosi
If there is a proposal to increase revenues outside of the potential we can increase them for more economic growth...
-- Eric Cantor
The thing nobody mentions is that Pelosi and Cantor agree on one very fundamental goal: economic growth.
Once again by the rule of thumb, this is wrong. Why?
The economy can’t grow with oil prices this high, and they're not going to come down for a sustained period of time again (relative to purchasing power). This is a fundamental, geological limit, one that I wrote about in previous diaries -- Why we need optimistic pessimism: the End of Growth and Life After the End of Economic Growth.
Sec. Chu knows this – he used to give talks about it before he joined the administration. The Department of Energy put out a great study, the Hirsch Report, in 2005 that the Bush administration tried to squash because they didn’t like its findings.
Alternative energy, while important and absolutely worth pursuing, will not be able to solve the problem in time, as I discussed in Nine Pitfalls of Alternative Energy and Blindspots of the Green Energy Movement (I don't mean to link to a bunch of my previous diaries - I just don't want to bore anyone by repeating them. In summary, alternative energy can help, but it's a small part of the answer and won't make a difference in time. So it's not that we shouldn’t try, just that we need to understand the real physical limits we face.)
What does this mean? It means we should step back and question why we're clamoring for economic growth when there are fundamental issues that constrain it. It's not that there's no awareness of this issue. There's plenty. But there isn't enough action, and it's the consensus in Washington that we need economic growth that prevents looking at the fundamental issues.
It's usually at this point in a diary where the author cites some like-minded individuals to the author, backing up the argument. I'm going to instead choose two organizations that probably think very differently from me: reports from the US Defense Department and its German equivalent, the Bundeswehr (Federal Defense Force).
By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 MBD....Another potential effect of an energy crunch could be a prolonged U.S. recession which could lead to deep cuts in defense spending (as happened during the Great Depression). Joint Force commanders could then find their capabilities diminished at the moment they may have to undertake increasingly dangerous missions.
-- United States Joint Forces Command
In addition to the gradual risks, there might be risks of non-linear events, where a reduction of economic output based on Peak Oil might affect market-driven economies in a way that they stop functioning altogether, leaving the possibility of a relatively steady downward trajectory.
Investment will decline and debt service will be challenged, leading to a crash in financial markets, accompanied by a loss of trust in currencies and a break-up of value and supply chains – because trade is no longer possible. This would in turn lead to the collapse of economies, mass unemployment, government defaults and infrastructure breakdowns, ultimately followed by famines and total system collapse.
-- German Bundeswehr
To be honest, when these reports came out, I was surprised how seriously they were taking the issue, and how dire they thought the consequences might be. Regardless of the specifics of their projections, it's a reminder that economic growth as we know it is over.
Debt is virtual. Energy is real.
It's around now that we need to be dusting off Carter's energy plans - especially his plans for energy conservation - and start implementing them at every level of government. Since alternative energy, which is a supply-side solution, isn't going to cut it, we need demand-side solutions, i.e. energy conservation. That means giving up our cars. Electrifying our rail (and building more of it). That means no longer investing money in roads, highways, and the industries related to oil-based transportation. That means insulating our buildings and homes. Changing zoning laws and building codes so they don't require parking spaces and air conditioning and minimum house sizes. And so on.
Washington can try responding in other ways, as I'm sure it will. At best I see people who ostensibly understand these issues just nod their heads and go back to the same tried-and-true "smart growth" maxims. But without addressing energy, though, we’re going to see no end to the recovery that never got off the ground.
Until next time...
Here are a number of great books to check out on these topics. I've tried to roughly organize them.
Highly Recommended:
Eaarth, Bill McKibben
The Long Descent, John Michael Greer
The Party's Over, Richard Heinberg
On energy:
The Hirsch Report, Robert Hirsch et al.
Sustainable Energy without the hot air, David MacKay
On climate:
Climate Change 2007, IPCC
Six Degrees, Mark Lynas
Related:
The Ecotechnic Future, John Michael Greer
The Post-Carbon Reader, Richard Heinberg et al.
What We Leave Behind, Derrick Jensen
Deep Economy, Bill McKibben
The Omnivore's Dilemma, Michael Pollan
Classics:
Overshoot, William Catton
The Limits to Growth, Donella Meadows et al.
The Myth of the Machine and Technics and Civilization, Lewis Mumford