Avoiding a Double Dip Recession, or Worse
The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK ( TheStreet) -- Jobs creation, industrial production and car sales are slipping. Consumer confidence and stock prices have turned south. The U.S. economy may be tumbling into a second recession or worse, hitting the mat for good. Solutions are at hand, but politicians--and voters--won't embrace what needs doing.
The U.S. economy lacks not ideas and enterprise, but is short on customers for what Americans make. The huge trade deficit sends dollars abroad that Americans earn to pay for imports but do not return to purchase exports and create jobs.
With a trade deficit exceeding 3 percent of gross domestic product, either Americans borrow and spend more than they earn to keep the economy going, or the demand for U.S. made goods and services is insufficient to accomplish full employment.Too many Americans can't find decent paying jobs, houses don't sell and prices stay depressed, and consumers don't spend. In the funk, unemployment stays above 9 percent, and counting adults stuck in part-time jobs or too discouraged to look, and young college graduates flipping hamburgers, it is closer to 20 percent. Oil and goods from China account for the entire U.S. trade deficit--on everything else, trade is balanced. The United States produces only 5.6 million barrels a day of oil and imports 9.6 million barrels--gasoline accounts for 8.3 million barrels. The United States could easily increase domestic production by 3 or 4 million barrels a day over several years and slice 2 million barrels off fuel consumption by using readily available, more fuel efficient internal combustion engines and plug in hybrids, and further deploying domestic natural gas use. Drilling in the United States is an anathema to Democrats, owing to environmental concerns, but not drilling and importing what oil is needed merely shifts environmental hazards abroad--mostly to developing countries--where those are handled less effectively. If American environmentalists really believe in thinking globally and acting locally, they should get behind domestic drilling if it is coupled with a program to substantially reduce domestic gasoline use. Curtailing gasoline use will be a bitter pill for Republicans--more government intervention in the form of higher mileage standards and assistance to automakers to more rapidly transform their factories. Fanciful investments in electric cars are nice--but electric solutions put in place by the Obama Administration won't generate sufficient reductions in gasoline use for at least a decade.
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