Triple Crises, Obama budget

If you stand in the middle of an intersection for a couple of days, you are fairly likely to be struck by something. In this case, fortunately for me, it was by a realization that I was, indeed standing in a "crossroads" of sorts.

I spent a couple of days last week in a high school. It is all too obvious that one of the critical failures of the educational system is to convince young people of the crucial need to get a good education. Perhaps that is partly a failure of society to mock and ridicule the meathead athletes who are so grossly overpaid to provide our weekend entertainment, but couldn't name all 50 states or spell Massachusetts without a spell checker, much less have an intelligent discussion on economics or the Moorish influences on Spanish history. (Okay, I confess, I used my spell checker to check the spelling of Massachusetts too, but I was raised in Canadian schools so spelling state names wasn´t heavily emphasized in elementary school geography for me. I defy most American educated adults to spell Saskatchewan correctly on the first try either.)

Now it may be true that the US Postal system uses zip codes and two letter state abbreviations to prevent nuclear scientists from mislabeling the packages going to Worcester, Massachusetts, but I doubt that it was the college graduates they had in mind.

President Obama´s stimulus package, and budget (although much of that budget was "last year´s business" as Peter Orszag said last Sunday on This Week with George Stephanopolous [especially the fact that the White House did not stage a major battle to remove the 9000 earmarks from this bill that has been in existence since before Obama took office]) put considerable emphasis on education. Indeed it was one of the three "legs" on which the government says our future stands. Those three are: Education, Energy, and Health Care. It has been called a lot of things, but I am absolutely delighted that the administration has not shied away from formulating a path that is a "new direction" for the country and the economy. It is exactly what I have been urging in private notes I submitted to the transition team and to the White House.

I honestly don´t know that my suggestions and opinions had any effect. It seems that my thinking and that of at least some key advisors to the administration is so closely aligned that rather than falling on deaf ears, my urgings are merely unnecessarily redundant. But I think it is important to offer support for those ideas we believe in, and especially now that the government has opened channels of communications (including a limited number of notes/letters from ordinary citizens that are being presented directly to the eyes of the President each week) if we want to have a "voice" in the choices our government makes, then we have to express those opinions directly to them, as well as publicly to each other.

Of course, the dominant crisis of the moment is none of those three mentioned here earlier. The economic crisis (or series of crises) is the proverbial "blimp in the broom closet". (Okay, that´s not "proverbial." I just made it up, but I´m tired of the over-used "800 pound gorilla" or the "elephant in the room" metaphors.) If we ignore the fact that I spend a good deal of my time working on green energy issues, I was still, it seemed to me, at a crossroads of three of our major crises as I confronted what was happening in that school last week.

I have touched on the first crisis already, which, although it is not the perception of many people, is indeed a core issue of the crisis in education: lack of student motivation. I know too that this has been a complaint since the time of Socrates. (Socrates apparently also complained that a new medium was ruining education: books. Why would students bother to memorize anything if they could always look it up in a book?) But just as in Socrates time, a shortage of really good teachers using the very best of teaching methodologies to actually reach our students are in short supply. (It must have been the same problem in Socrates time, or we´d have lots of "famous" teacher/philosophers from his generation, wouldn´t we?) And you will note that during his speech to the joint houses of Congress, President Obama took the time to mention that parents had to spend more time parenting their kids. It is, of course, a joint responsibility for both home and schools.

But the budget crisis reared its ugly head, too, while I was there in this school because when the nurses´ office ran out of a crucial supply most of the regular employees around me "assumed" that this was the end of the stock for this year, and that the school (and more particularly the students who needed them) would just have to make do without them until the end of the year, or at best wait for the regular nurse to return to order more since obviously none were on hand. Fortunately for all, that was a mistaken impression on their part. The supplies were eventually brought in by the trusty maintenance staff, and we proceeded without any interruption. It was relevant to the real budget crisis though because even the perception of expected scarcity was affecting people´s behavior.

Consumers and business leaders alike are reacting like flocks of frightened birds, twittering and fluttering and accomplishing very little. Frightened into inaction, mortgage companies and banks are reluctant to take the write-downs, or renegotiate the loan terms, simply take the one-time hit and move on. Come on, folks. Could Bank of America or Citibank shareholders have suffered any more than the stock prices have already done to them? Well, they could. We could just simply nationalize the banks and eliminate shareholder equity completely, but that certainly wouldn´t be any better for the shareholders than the severe dip of a disastrous quarterly report.

During my two day tenure as a substitute nurse I saw a "crisis" of health care of my own, that is, among the "patients" I saw. There were approximately 100 students visiting the nurse´s office during those two days, our of a student population of about 1800. The majority of health issues were headaches, coughs and sore throats. But there were also disasters including second degree burns on an food services employee who had to be sent to hospital, a student seizure – taken away by ambulance, another youngster struck by a fast moving ball during physical education period which resulted in symptoms that may have been indicating internal abdominal injuries, and last but not least, a student exhibiting symptoms which, superficially at least, appeared consistent with tuberculosis who, therefore, had to be sent home for the protection of the rest of the student body (and staff).

There was an interesting comment on the global economic crisis from Canada´s Prime Minister, Stephen Harper, when he appeared on Fareed Zakaria GPS this past weekend. He pointed out that a series of economic stimulus packages that were used in Japan during the 1990´s were focused solely on dealing with a national economic crisis, and the result was a lost decade of extremely poor economic results. He indicated that he believes that economic stimulus to affect this worldwide economic crisis will have to take a global view, considering not merely what is good for the country, but also what is good for the global economy. I am a strong supporter of this view point.

I think that most analysts are afraid to advocate a loosening of the money supply for fear that inflation will be the counter-argument. I say that inflation is a systemic driver in a capitalist system, and that while some inflation cannot be avoided, it is also a good thing because it expands capital, and in times like these can be an absolute friend by decreasing the dollar value that will improve our exports and balance of payments internationally, as well as inflation being a factor that will aid in the recovery of the housing value crisis that underlies the mortgage crisis (where "mark to market" practices have caused the fall in perceived value of housing to deflate the values of the mortgages and thus create the capital reserves crises in the banks). Weaker dollars and stronger inflation will make foreign goods more expensive, domestic good more attractive (without resorting to "protectionist" practices that will only result in restrictive trade countermeasures from trading partners), housing values will recover more quickly (whether or not they immediately recover to the values set when the mortgages were written, they will at least be higher percentage-wise), and foreign imported oil will again be more expensive and thus further stimulate domestic green energy production.

I assure you that if I can see this, the geniuses in the Obama Administration can see it as well, and are smart enough to act on this, or at least, apparently, smart enough to follow my advice on the subject.

Oh, yes, Fareed Zakaria had one other significant point to make on last Sunday´s program: Canada, alone in all the major countries in the world, has not had a single bank failure amid this global economic crisis. That is not to say that banks never fail in Canada, but Canadian banking laws do work rather well, and could serve as a model for a reform of American banking industry. Coming from the free and unfettered system we have had in America for the last 30 years, American bankers might not like those kinds of regulations, but 3 of the 5 richest people I have met made their money (or their families did, originally) in Canadian banking, so I´m not going to be too sympathetic to the expected moaning and groaning if such restrictions are imposed on American banks.

Okay, I´ve talked a lot about politics this week and not a lot about biofuels. Here is a video from the "National Clean Energy Summit" from UNLV sponsored by Senator Harry Reid (among others, but Harry´s from Nevada, so, you know, they were kinda stuck with him). Harry´s not in this, and I put this here mainly for the section by Secretary of Energy Steven Chu (feel free to skip ahead to that part if you get bored).

Have a great week, and don´t smoke any wooden nickels.

Love and warm wishes,

Sincerely,

Stafford "Doc" Williamson

http://daochienergy.com