At year end 2011, as Americans emptied their wallets at the gas pump and crude oil reached almost $100 a barrel, OPEC kingpin Saudi Arabia reported an $81.6 billion 2011 budget surplus.
The White House action at the same time was to ask Congress to increase our debt ceiling by $1.2 trillion to $16.4 trillion to cover budget deficits.
Nations decline and fall when their economies and monetary policies are incompetently managed. Unfortunately, it appears to be a lesson lost on too many of our leaders who have allowed the very stability of our nation to be imperiled by budget deficits and mounting debt. Our leaders have also failed on energy independence, allowing the cost and supply of the strategic commodity of oil to be controlled by foreign nations.
The ominous linkage between cyclical recessions and our repeated failure to achieve energy independence and oil price stability has caused much hardship on our citizenry and severe damage to our economy.
The historical evidence is clear. Whenever oil prices spiked as they did between 1972-1980, and then again between 2003-2008 and beyond, recessions in America followed.
In 1972, crude oil prices were $3.60 a barrel. By 1980, the cost of that barrel was $37. This 1000% oil price increase contributed to a negative economic chain reaction. The CPI more than doubled during this period. Double digit inflation ensued, causing the Federal Reserve to raise interest rates. This, in turn, sent the Prime Rate to over 20% by 1980. A recession followed.
A Fiscal Tsunami
Whenever the United States took serious notice of oil prices as an underlying cause of these problems, Congress would debate energy savings and energy independence. A concerned OPEC would then divert America’s attention by opening their spigots, increasing production, and causing oil prices to drop to under $20 a barrel and remain relatively low for a time. While the immediate crisis would be averted by these actions, Congress did little to protect our future. Consequently, by 2003, oil was up again to $30 a barrel and steadily increased to over $90 in January 2008 and spiked to over $140 in July 2008.
As in the past, by 2008, the enormous increase in the cost of oil resulted in nationwide price increases and surcharges in substantially all industries. It was an assault, like a fiscal tsunami, that put too great a financial burden on the United States economy and its citizenry and set the stage for business failures, unemployment and a decline in real estate values. Rating agencies blessed mortgage investments based on a rising economy; however, the chaotic oil spikes triggered the opposite effect. Thus, as in a violent storm, weak structures failed, especially the over-leveraged mortgages and the volatile mortgage-backed securities and related financial markets, which became illiquid, causing the American economy to experience the 2008 meltdown.
A significant part of this ruinous economic condition involves enemies sworn to destroy the United States. Since 9/11 the United States has spent trillions of dollars on homeland security and our military to sustain the War on Terrorism. It is grimly ironic that simultaneously, trillions of dollars have left our economy to purchase oil mostly from OPEC nations that directly or indirectly support radical Islamic fundamentalists. This absurdity has resulted in a punishing double body blow to our economy.
The Resources But Not the Will
It is now almost 40 years since our country was first adversely affected by its failure to become energy independent. The United States has the natural resources and the technology to produce clean energy. Over time however, we have lost our way time and again because we have been confronted with a deliberate policy by obstructionists seeking to prolong the debate over energy independence for the specific purpose of preventing a national consensus on energy policy.
Are the obstructionists the sincere environmentalists or the professional anti-capitalist environmental radicals who would have us return to an agrarian society? Other suspect quiet assassins of American energy policy include: foreign interests influencing Washington, and those who own domestic oil production and seek to sustain high oil prices and unprecedented returns, and still others who sell their manufactured products to foreign oil suppliers and do not want to lose those lucrative markets.
Those who aspire to be our future elected leaders should immediately present their strategy for energy independence—one that marginalizes the obstructionists—and commit to a plan of action.
Defining Our Future and the Current Presidential Debate
The voters are aware of the hazards of our present policies that will lead us into the role of a third world debtor nation. They want more than vague speeches. Who we are as a nation in the 21st century will be determined by how we strengthen our economy by streamlining government operations, eliminating wasteful spending, and most importantly promoting economic growth that creates jobs. Energy independence can be a major first step in this effort. It will help us achieve a balanced budget and genuine national security in a world of lethal threats and economic challenges.
These are the issues that should and must define all nationwide election campaigns.
—Lawrence Kadish is an advisory board member of the Stonegate Institute and a trustee of the Claremont and Hudson Institutes. This opinion essay was originally published by the Stonegate Institute and is reprinted by permission, with minor edits for style.