“As our elected officials reach into our pockets to bail out those favored few grown too big to fail, cultural and political forces are lining up to sew the seeds of our next bubble. The tales they are spinning may sound sensible today, just as ‘increasing homeownership’ had few detractors yesterday. But next time we are forced to run and hide we will surely be asking, ‘What were we thinking?’”—Bill Frezza, “Fueling the Next Bubble,” RealClearMarkets, December 1st, 2008.
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The Green Crusade has begun, and unless the American people are vigilant to defeat the policies it advocates and the religion it rests upon, the nation that remains in its wake will be unrecognizable.
Flush from electoral victory in 2008, and cognizant of how quickly the political tides can change, the advocates of radical environmentalism will be on the offensive in 2009. They will remind the newly elected Congress of its allegiance to those who put them in power, and Congress will indeed attempt to reciprocate, as it has this session with the current round of bailouts, kickbacks, and subsidies to prop up the skyscraper industries of finance.
And today’s bailout will help fuel tomorrow’s bubble. With the unprecedented liquidity injections, emergency lending, and bailouts occurring globally by central banks, the question is not if there will be another bubble, but where, when, and how large it will. Gazing into his crystal ball, Adams Capital Management’s Bill Frezza predicts the next bubble will be have a green luster.
The next bubble, according to Mr. Frezza, will be fueled by the errant pursuit of a government policy—cap-and-trade—where Congress will foolishly seek to limit carbon emissions by attaching an additional price to their use on the heavy, fuel-burning industries, and as a result, passing on the costs to all consumers of energy. In the short term, there may be a boon for the beneficiaries of the anti-carbon energy industries—wind and solar, although not nuclear given the greens’ prejudice against splitting atoms—which will be flush with government subsidies.
In the near term, the carbon-burning industries will publicly embrace the policy for fear of government regulation and for hope of avoiding Uncle Sam’s wrath. Which is a lot like sharing your last meal with the executor.
In the longer term, America’s energy industry could lie in ruins on the heels of an unwise quest for controlling the climate.
And there will be a predictable rise in the energy the American people actually depend upon: coal, oil, natural gas, and gasoline, whose additional costs for producing and consuming will have to logically be attached to the price paid at the pump and on the monthly bill. Carbon credits will be traded much like useless tulips—a speculators’ dream—adding artificial value to the energies they seek to restrict. Prices will soar.
These extra fees will in turn be poured back into green energy as the fuel-burning auto industry is buried, to be replaced by a heavily subsidized green auto industry and massive public transportation projects. The extra carbon taxes will in principle fund the green economy, but of course that will not be enough, and much will have to come directly from taxes, which again will not fit the bill, and so the rest of it will have to come from borrowing and deficit-spending. And so the bubble will inflate.
Businesses will adjust to this new environment, perhaps with some resilience to finding loopholes and ways to save money in the new green economy. But the regulators will follow up soon to close up the loopholes and attach yet more fees to simply filing “carbon compliance” forms. Soon, the cost of going green will exceed the profit motive. Subsidy will become the only way to run a business in the eco-government. (Perhaps that’s by design?)
Add to that the irrational economic implications of forced energy rationing at higher costs, and businesses and workers’ abilities to be productive will become strenuous. Merely getting to work will be even more costly than motorists saw at the height of the oil bubble in 2008. A disproportionate amount of wealth will go to propping up the new, cleaner, greener economy. As a result, state and local municipalities will struggle even more than they do today to meet budget shortfalls, and the cuts will be massive.
That is not to say there will not be economic recovery—or the illusion thereof—in the interim. The whole point of the excessive liquidity, bailouts, and lending today is to prop up the economy from financial failure, and to perpetuate economic growth. Eventually, some of these additional funds may even be invested, and jobs created. The greens hope to exploit the new Congress to ensure that there is the industry that is subsidized. Short-term rallies will ensue as the big, green bubble is inflated.
It may not come to pass, however. All predictions are subject to human error, and this one does appear to hinge upon an important assumption: that Congress will be able to pass a federal limit upon carbon emissions. To a certain extent, as Mr. Bruzza outlines, there already are limits upon the production of hydrocarbon energy via federal, state, and local restrictions, as well as blocks upon increased energy production, including nuclear, via court order.
The current hindrances to a national energy policy must be repelled, and the current restrictions on energy production repealed, for the sake of all.
Those who value liberty and prosperity may yet be able to turn back the tide against the Green Crusade. An early victory can be waged in Congress itself by again defeating a national cap-and-trade system. State and local races also need to be waged against radical environmentalism in coordinated fashion, court rulings against energy production banned, and green regulations repealed. Americans want to preserve the environment, but not at the cost of their livelihoods.
As conservatives mount campaigns locally against the Crusade, so too must they insist upon a national debate on the “science” of man-made global warming. There is enough exculpatory evidence against the phenomenon—chiefly by the prime role actually played by the sun in controlling the climate—and there has been enough peer review by scientists who do not accept the dogma that mankind is destroying the climate for there to at least be nationally televised debate between scientists who believe they can prove the “science,” and those who have already begun discrediting the prophecy of defective computer models.
At most, those who value the unparalleled potential of the American economy must wage a massive public relations battle against this flawed science on every airwave that is still yet free to broadcast upon. If the maturing generation blindly follows this dogma by majority, the Crusade will inevitably succeed.
On the other hand, a policy—indeed a Crusade—based upon a scientific consensus will unravel that much quicker under the weight of disputed findings and flawed predictions broadcasted so loudly that all must hear. As the “science” is discredited, so too will the policy it depends upon and the crusaders it exploits be shamed into submission.
Robert Romano is the Editor of ALG News Bureau.
