Economy
Posted: 02/02/10
Obama's 2011 Budget: "Go Arounds" to Circumvent Failed Legislative Initiatives and 2010 Elections - Part One
Publication Date: Feb. 2, 2010
additions & corrections: Feb. 3, 2010, 11:52 am, CST
additions: Feb. 4, 2010, 5:08, CST
by Diane W. Collins
dcollins@marketingweb.com
Monday, President Obama released the proposed FY 2011 White House Budget of $3.8T which would incur an additional $1.56T deficit showing the President's unchanged resolve to follow his original agenda regardless of the unsustainable debt our country faces. Rhetoric, blame, 
overwhelming statistics backed by generalities, and a second stimulus promoted as a "jobs bill" filled TV newscasts and newspapers... not to mention the proposed budget, itself. (Go to www.budget.gov to read it in its entirety. We did.)
To the President's credit, the 2011 Budget under the Department of Defense strongly supports the United States efforts in Afghanistan, Pakistan, and Iraq while providing our troops and their families with the benefits they deserve and have earned. Secretary Gates is to be commended on his ability to effectively communicate those needs to the President. But beyond Defense, there are serious questions surrounding the intentions and future impact of Obama's Budget as its proposed "go arounds" attempt to circumvent failed legislative initiatives and the potential impact of unfavorable 2010 elections. In other words, as he attempts to circumvent We, the People.
On the bright side, the 2011 Budget can be viewed as a strategy map handing us the Administration's playbook. To get past the minutia that obfuscates logical analysis and capture this "playbook," view the Budget with an eye identifying the administration's priorities, failed initiatives and the proposed effects of 2010 elections. Put the calculator down. This perspective tunes out the "noise." From this vantage point we can re-focus on budget details revealing where the administration funds objectives and dovetails department budgets to maximize financial support for Obama's original agenda.
Priorities for the administration were named early on as Healthcare, Energy and Education. Eventually these priorities were expressed as the now failed legislative initiatives Healthcare Reform and Cap-and-Trade. (Education as a priority and the strategy of the administration in this arena are equally important but did not meet with the same initial public outcry... For this reason they are covered in subsequent additions to this article.) The attempted government take over of healthcare has become an albatross around the administration's neck. Its prioritization in the face of a failing economy bleeding jobs seemed out-of-touch at best. Most recognize our healthcare system needs reform, however, the sweeping changes proposed by a government that has trouble managing Social Security and Medicare were firmly rejected by the nation. Many asked, "Why do we have to change everything to "fix" the system? Can't we just give those who don't have insurance their own program?" Although the President still supports the "government option" and his Budget says precious little about healthcare reform, he appears to have done just that by providing $2.5B for the "under served" and the "uninsured."
In the section entitled, Reviving Job Creation and Laying a New Foundation for Economic Growth, under "Revitalize Distressed Urban Neighborhoods,"
"The Budget includes $2.5B for health centers to provide affordable high-quality primary and preventative care to under served populations, including the uninsured."
Hey, in lieu of any further discussion of a "government option," I for one, would favor caring for the "under served" and the "uninsured" as proposed by this section. And yes, we need additional legislation to address private sector health care reform in areas of pre-existing conditions and healthcare industry abuses. But, what we don't need is a government take over. That's Big Government establishing more control over the electorate and developing yet another source of revenue. And with Big Government as broke as it is, one has to wonder if the payments into a "government option" would be plundered... like Social Security. America did not "misunderstand" the whole healthcare debate. America saw through it. So for now, healthcare reform is on the back burner and Obama will take care of the "under served" and the "uninsured" through his proposed 2011 Budget. It's a "go around" to circumvent failed healthcare reform legislation. I'll give him a pass on this one. But keep your eyes open. The Big Government mantra of "healthcare for all" through a "government option" will rise again. We saw it with Clinton. We've seen it with Obama. And, if Hillary succeeds in 2012 with a two-for-one, we'll see it again.
At the moment, conservatives have another piece of the Obama agenda to worry about... hidden under the "second stimulus" or "jobs bill" and further funded in the Budget. It's the administration's attempt to circumvent another failed legislative measure and implement the effects of cap-and-trade. Cap-and-Trade legislation was passed by the House in 2009 but did not make it through the Senate. Several times in his 2010 State of the Union address Obama chided the Senate while praising the House for its ability to pass bills that supported his agenda. Referring to cap-and-trade Obama stated, "We must invest in energy." His mention of more nuclear power plants in this country and new offshore areas for oil and gas development, biofuels and clean coal seemed a bright spot for a moment. Then came the words
"...passing a comprehensive clean energy bill that will make it profitable."
In our opinion, the President understood defeat but is still defiantly "plugging" cap-and-trade. And this time, the administration is not taking any chances as it initiates plans to circumvent the failed legislation through the Budget. The first part of the plan is to offer "something." Obama's Budget under the Energy Department provides $36B in guaranteed loans for advanced nuclear power plants. Initially his administration did not favor increasing the number of nuclear power plants... (environmentalists have problems with the disposal of "spent rods.") More nuclear power is something many conservatives want. But this "something" has a caveat, and the caveat is time. According to the Nuclear Energy Institute (NEI),
"The energy industry is pursuing plans to build 26 new nuclear power plants to meet projected increases in U.S. electricity demand. However, the domestic infrastructure for building new nuclear plants has diminished because few plants have been built outside of Asia. As a result, the industry may face difficulties obtaining components necessary to build new nuclear plants, as well as experienced construction management, engineering personnel and skilled workers."
Meaning, it's going to be awhile before any new plants are online. So the value of this concession is diminished by its inability to provide any near term contribution to domestic energy production.
Next, Obama's Budget takes something away. It eliminates existing tax incentives for fossil fuel development. That's the exact opposite of what Obama intimated in his 2010 State of the Union address where he called for "new offshore areas for oil and gas development." In fact, Obama's Budget under the Department of Energy clearly articulates his true bias:
"The Budget also eliminates funding for programs that provide inefficient fossil fuel subsidies that impede investment in clean energy sources and undermine efforts to deal with the threat of climate change."
These "inefficient fossil fuel subsidies" were originally established to encourage the fossil fuel industry to research and develop means of extracting domestic natural resources more efficiently. Importing oil was and is currently cheaper. So these subsidies were put into place because it was not profitable for private industry to pursue domestic resources. But, it was and is in the national security interest. The development and research derived from these fossil fuel subsidies have produced new means for domestic extraction that are allowing the United States to have less reliance on foreign oil. We have choices within the current energy paradigm to act on domestic production in a time of national crisis or when OPEC jerks our chain and the price of foreign oil goes up significantly. Relying on domestic energy production from an existing fossil fuel paradigm is more logical than pretending we can rely on a green paradigm, not yet created. To logically solve a problem in a moment of crisis or near crisis, you must take a snapshot in time identifying the existing solutions. What you might have in the future doesn't cut it.
Speaking of the future, most Americans understand green energy is something to move toward, not because of the heavily debated theory of "climate change" supposedly caused by CO2 emissions (water vapor), but because of actual pollution. And, do not feel it is necessary to destroy the existing fossil fuel paradigm that provides cheaper energy in order to create more expensive alternative green energy resources. They want an "all of the above" approach. It helps balance the cost of energy and gives the various regions of our country the ability to develop their specific regional resources. That being said, at this moment in time it is economically foolish not to purchase foreign oil when the price is cheaper than the cost to take it out of our own ground! It is equally foolish from a national security perspective for a nation to cut funding for the continued development of domestic fossil fuel production when that nation's existing energy paradigm is currently based on importing foreign oil. Domestic oil production is our best current alternative to foreign oil. But, it gets worse.
According to the Associated Press, the Budget measure imposes about $39B in tax increases on oil, gas and coal companies over the next decade. Further, in an article written by Dave Michaels of the Dallas Morning News, Washington Bureau citing the Independent Petroleum Association of America " repeal... would cause oil and gas companies to scale back their drilling budgets by 20 to 40 percent." Supply and demand dictates oil, gas and electricity prices would increase. Of course, that helps Obama reach one of his cap-and-trade goals which is to increase the price of fossil fuel so green energy can compete. Besides the obvious market manipulation, there's a problem. Green energy does not exist in quantities or means of distribution to offset the immediate fossil fuels production cuts! Meanwhile, America's energy costs would skyrocket!
Similar to his decisions regarding the Financial sector, President Obama is "picking and choosing" once again. Choosing which companies within the Energy sector will succeed and which will fail. Ironically, Obama's Budget is filled with "inefficient subsidies" for green energy. I do not argue with our need to develop alternative green energy as an additional means to ending dependence on foreign oil and reducing pollution. But, it's the Obama administration's logic surrounding why and how that's flawed. For all Obama's talk about "transition" this Budget measure proves he has no intention of letting the free market work in determining what type of energy America will use.
(Much more tomorrow as we continue our series on, "Obama's 2011 Budget: "Go Arounds" to Circumvent Failed Legislative Initiatives and 2010 Elections.")
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