Sunday, June 15, 2014

Reducing the Price of Oil is the Only Sure Way to Advance U.S. Interests

Today's news in one form or another revolves around the spread in conflict throughout the regions that constitute the Edge of Chaos, a book I read 10 or 20 years ago.  From the southern border between the Sahara and Sub-Saharan Africa through the Middle East into the Southern Caucasus Mountains and on to the 'Stans, these regions all represent a possible home for Terrorists and attack on the U.S.

We cannot afford (thanks to the borrowed War On Terror) to put troops in all these places nor can our burned out military psychologically deal with being on the ground in all these places 100% of the time.

Where did these terrorists come from?  Well many of them arose out of grievances against domestic governments that were/are corrupt and ineffective or dictatorial.  But what all of them have in common is a need for money.  Iran is only negotiating (albeit at a snails pace) over its nuclear ambitions because the sanctions have harmed their access to money that they need.

What is the number 1 source of revenue to finance these activities?  Oil revenue from rich Arabs in the Gulf States and Sudan and Oil revenue to Russia.

That is why I now believe it is imperative for the United States to reduce its imports of oil in a prudent way.  A two fold effort aimed at increasing North American production while reducing consumption would provide both a demand and supply shock to reduce the global price of oil and reduce the revenues going to these terrorist organizations.

A sharp word with the Saudi's, the Kuwaiti's, the Qatarese, and Abu Dahbians about their need to curtail the flow of funds from their citizens to terrorist organizations would also be in order, but I would not hold my breadth thinking they will do anything.  Their interest is in keeping the price of oil  high and terrorism accomplishes that.

We might have a discussion with the Chinese and EU about this as well.

The supply shock is further development of fracking (done in an environmentally safe way and it can be done in such a manner) and building the Keystone pipeline.  The Demand shock has to be a higher gas tax with revenues funneled into Tax Reform that reduces tax rates without increasing the budget deficit.  Then people, while they will have money to pay the higher price on gasoline, would also have a motivate to drive more fuel efficient cars and drive less.  A Cap & Trade program in tandem would also help green house gases to offset the increase from the Canadian Tar Sands.

Energy, Economic Growth and National Security are completely interlinked.  We need to consume less energy to reduce the flow of funds to terrorism and we need a strong economy to provide revenues to pay for both a safety net and a military capacity.  Raising the minimum wage and bringing undocumented immigrants into the formal economy would provide a boost in both revenue and tax paid by low wage workers that would help increase demand in the U.S. and boost revenues to further balance the budget.  While we are at it, perhaps we could even put in few fixes to stabilize entitlement financing over the next 40 years.

The Democrats have to be this bold in explaining how their policies need some GOP policies if the country is to move forward in a stable manner.

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