Frack-tured Fairy Tales

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People of a certain age will remember the Rocky & Bullwinkle Show.  It was a prime time satirical cartoon that was popular decades before The Simpsons and Family Guy.  A regular feature of the show was ‘Fractured Fairy Tales’ which played on malapropisms to get you to chuckle.  They were kind of ‘punny’ in their day.

Now, the governor of New York is promoting his own fairy tale.  This one is over fracking, the controversial practice of bringing vast newly discovered reserves of natural gas to the surface. New York is sitting on the Marcellus Shale, the second largest known reserve of natural gas in the world at 95,000 square miles ranging in depth from 4,000 to 8,000 feet.  If it had been discovered in Texas, every pickup truck in the state would be on autopilot to the nearest wellhead.  Money would have been invested, drilling would have commenced, a new source of energy would be available to the public and guys wearing boots and ten-gallon hats would be lighting cigars with hundred dollar bills.

But, not in New York.  Many a pickup truck can be seen with a ‘No Fracking’ bumper sticker and the environmental lobby holds a lot of sway in Albany.  This is no small matter.  Studies done by economists at Citigroup project that natural gas coupled with improvements in alternative energy sources and efficiency of power plants, factories and autos have the potential of making the US energy independent within a decade. 

Fracking will attract Foreign Direct Investment (FDI), which has been on the decline since the start of the Great Recession.  Energy independence will reduce our net trade deficit by approximately $433 Billion per year. Energy independence will mitigate our national security concerns in the Middle East, reduce our carbon footprint and create domestic jobs.

I do not mean to diminish the environmental concerns.  Anyone who has seen the documentary Gasland knows that fracking, if done improperly can ruin the water supply.  But, it’s being done safely in places like Texas and North Dakota.

To stir the pot a bit, President Obama has nominated Ernest Moniz to head the Energy Department.  Moniz comes from the MIT Energy initiative, financed by the industry.  He has expressed support for nuclear power and has declared the risks of fracking to be “manageable”.  Perhaps the President really intends to follow through on the policies he outlined in his State of the Union speech:  “this country needs an all-out, all-of-the-above strategy that develops every available source of American energy.”

That isn’t to say that there won’t be incidents.  These activities are prone to human error, as Three Mile Island, the Exxon Valdez and the BP Gulf oil spill have shown us.  But, the opportunity is too great to ignore.  The question isn’t should we or should we not frack.  The question is how can we do it as safely as possible. 

Moreover, we must be view fracking and natural gas in the proper context.  It is not the final answer.  It is a bridge solution.  In the near term, it will reduce greenhouse gases and reduce imports of foreign oil.  However, it’s equally important that we support the research and development initiatives of government agencies like the Advance Research Projects Administration – Energy (ARPA-E) that will provide long term solutions that will enable us to be energy independent while emitting fewer greenhouse gases.  None of the alternative energy options are economically or technologically viable today.  But, they will be some day.  Just not some day soon.

For New York, there’s a broader issue.  Governor Andrew Cuomo has declared his state “Open for Business” and is backing it up with an impressive public relations campaign.  But, such declarations must be backed up by facts.  Businesses are driven by dollars not slogans.  And, New York continues to lose jobs and people to other states. 

In a recent TV ad, the governor makes a big deal about his new policies not increasing taxes.  But, if he wants his slogan to be true, he needs to come to grips with the lack of competitiveness from which New York suffers compared to other states.  Businesses set up shop in low tax, low cost states.  New York is at the opposite end of the spectrum.

The governor must address the structural problems that cause New York to be lagging the nation in job growth and unemployment.  Otherwise the ‘Open for Business’ campaign is just another Fractured Fairy Tale.

WHO WILL LEAD?

Good, Better, Best... Never Let It Rest

When I was a kid, my mother taught me a little poem by way of encouraging me to be my best.  It went like this:

Good, better, best

Never let it rest

Until your good is better

And your better, best

My grandparents emigrated here from the old country, Mom reminded us.  We were obligated to take advantage of that opportunity.  We weren’t expected just to be good; we were expected to be exceptional.

Our political discourse is littered with the term “American exceptionalism” these days.  Conservatives like to remind voters of the loss of traditional values and its impact on society and our place in the world.  Liberals point out that our greatness was enabled by government and social structures that were the creation of a central government.   

America is, indeed, exceptional largely because it has some inherent advantages.  One must start with geography.  We are the only country in the world with long navigable coasts on both the Atlantic and Pacific and we have a natural river system that seems to have been designed to deliver goods to seaports for shipment overseas.  Our land is fertile and our climate diverse enough to produce a vast array of agricultural products. 

Our second advantage is cultural.  The earliest English settlers in the 17^th Century were adventurers determined to forge a new world.  The charter for the settlement in Plymouth, Massachusetts from James I permitted the establishment of a republican government independent of the crown.  The founders of the United States were grounded in the philosophy of Locke, Spinoza, Voltaire and Adam Smith.  They gave birth to a nation that thrived on independence and achievement. 

Nineteenth century America was marked by a period of laissez-faire government that enabled entrepreneurs to create railroads and the telecommunications, steel and energy industries.  In turn, these developments enabled America to achieve global economic leadership in the 20^th Century. 

Like any nation, ours was founded by way of bloodshed as the early English, French and Spanish settlers fought with Native Americans and each other.  But, over a 150 year period, American global hegemony emerged from that bloodshed and through the strategic brilliance of American leadership.  Our mainland was secured and our economic future was insured by the Louisiana Purchase in 1803, the Mexican-American War of 1845 and the Spanish-American War of 1898. 

Oklahoma Land Rush

The founders were also keenly aware of the need for a government to provide opportunity for those less fortunate.  James Madison provided for the right to a free education and public land in the Virginia constitution.  The 19^th Century saw an immigrant-driven expansion into the Great Plains enabled by the Homestead Act of 1862 which provided free land to those adventurous enough to claim it.  This egalitarian culture of governance enabled immigrants over our 236 year history to make a better life for their children and in turn drive U.S. economic growth. 

The Industrial Revolution moved bread-winners off their farms and into factories.  That corporations were not the most humane of bosses led directly to the social reforms of the 20^th Century.  Laws protecting the right of collective bargaining, worker safety rules and the development of a “social safety net” were government’s response. 

The U.S. military, which had virtually created the steel industry in the 19^th Century, evolved after World War II into a “military-industrial complex” (a phrase coined by President Eisenhower) which fostered innovation through scientific research and led to space exploration, the development of the internet and the explosion of the electronics industry.

The U.S. education system – public schools and the university system – produced the best educated workforce in the world.  World War II’s destruction of foreign industrial capacity provided a window of opportunity in post-war America to thrive economically and attract vast inflows of capital investment.

Now, many of those trends are beginning to reverse themselves.  Our education system is no longer producing the best graduates.  The shift in our economy from manufacturing to services has motivated our best and brightest to abandon science and engineering in favor of finance and law.

Foreign Direct Investment in the U.S., which peaked at over $300B in 2000, had dropped 50% by 2010.   Meanwhile U.S. multinationals and investors have increased their investment overseas to new record highs – over $400B in 2009 remaining over $350B in 2011. 

How could a country with so many natural advantages come to this point in the 21^st Century?  How is it that our political class sees everything as a battle between two world views as opposed to seeing opportunity to build on our successes of the past?

Today’s political debates over education, immigration, healthcare and the national debt offer no hope of compromise.  There are well thought out solutions to each of these major social and fiscal issues.  They are well documented and understood by leading members of Congress and the Executive branch. Yet, each side of the political divide lives in fear of being "primaried" if they compromise the core principles of the extremes of their respective political parties. 

The political forces at play during our Revolutionary War and its aftermath were marked by fierce philosophical differences as well.  Indeed, there was doubt that the 13 colonies who had defeated the British could sustain as a single nation. Each had its own political philosophy, constitution and currency.  Many in the north advocated for union while many in the south feared the influence of money center banks and a central government.  There are echoes of this debate evident even today.  Yet, with a vision of what our nation could become, the founders compromised for the greater good.

The outcome was an exceptional compromise:  the United States of America. 

WHO WILL LEAD?