Columnist and author Bob Woodward recently observed about Congress and the White House that we have a situation that is like permanently being in divorce course with no settlement on who gets the kids.
Every day that goes by it is clear that more gridlock is the likely future for important legislation and on other matters as well. The sniping that is taking place over the President’s choices for Secretary of Defense and CIA Director is just the latest example.
There was a time, and not long ago, when a President’s cabinet choices were routinely confirmed unless there were disqualifying moral, ethical, or legal issues. That is not the case with these two candidates. Senate opposition to Senator Hagel seems rooted in his independence and a desire by some senators to give the President a hard time – a dynamic that well encapsulates the partisanship-for-the-sake-of-partisanship tone of the last several years.
Confirmations are important, but outside the Beltway, pale in comparison to the heady legislative issues facing the nation. In the very near future, there has to be a resolution to the looming debt crisis. The divorce court scenario could cause serious economic damage. The Republicans say they won’t vote to increase the debt limit without spending cuts and the President says he won’t negotiate. If this impasse continues, our anemic economic recovery will be in serious jeopardy.
There are claims that failure to raise the debt ceiling will result in default and that this action will have dire consequences, perhaps globally. But, default has been made to appear more draconian than it is, and the rancor has, perhaps, obscured more foundational issues.
Over the last four years, annual federal spending has increased $700 billion. If spending cannot be brought more in line with the pre-recession levels going forward, then there is no hope for achieving fiscal sanity. At this time, no one knows whether default and sequester will actually take place. Markets hate uncertainty and little good can come from this politically created uncertainty.
So far, this induced uncertainty has not had a big negative impact on oil and gas production and the economic benefits that come from it. EIA has recently forecast that oil production, which hit a 19-year high last year, will continue to increase through 2014. Shale gas production continues to be a bright light although the drop off in drilling activity could be troubling going forward.
The potential for oil and gas to stimulate a sustained economic recovery is significant. A recent study by IHS concluded that shale gas development has created 1.7 million jobs that number could grow to 3 million by 2020. As we develop and use more of our own energy, spending for imports will decline and be invested here. But the economic benefits from domestic oil and gas development can contribute only so much. Moreover, policy proposals that threaten the contributions of the industry – like ever-present efforts to increase their already massive tax burden – are harmful to our nation’s long-term recovery prospects.
We need to unleash more private investment. Too much private capital is sitting on the sideline because the climate is not that good. Unemployment remains unacceptably high and economic growth is steady but not strong and the prospects for solving our fiscal issues dismal.
In an address on January 10, Chamber of Commerce President Tom Donohue said, “As a nation and a people, we must finally face up to the single biggest threat to our economic future—and that is our exploding national debt, driven by runaway deficit spending, changing demographics, and unsustainable entitlements.” …“Economic growth cannot solve all of our problems, but without growth, we will not be able to solve any of them.”