Obama's Energy Policy: Where's the Alternative Energy Economy?

Energy policy was a major theme of Barack Obama's campaign for president. Then-Senator Obama argued that we should promote private sector growth in sustainable energy technology, leveraging its potential to bring overseas manufacturing jobs back home and reduce dependence on foreign oil. Nonetheless, we are now in the depths (perhaps the aftermath?) of a financial crisis worse than the United States has experienced in decades, and yet a sustainable energy policy has not been made a priority. So why hasn't Obama acted on his energy prescriptions? The President and Congress must take action now to promote American competitiveness in green technology. Here's why:


The Trade Deficit
The use of Foreign Oil fuels the U.S. trade deficit. When oil is more expensive, its effects on the U.S. economy are amplified. High oil prices can cause the entire economy to contract--resulting in more expensive (and therefore less globally competitive) manufacturing, which leads to fewer jobs, and those fortunate who have jobs to be squeezed by rising prices: food, manufactured goods, transportation, electricity and heating all become more expensive. The American public (or perhaps just major media outlets) seem to have amnesia. We had record oil prices just a year and a half ago, with prices only falling in the wake of the financial crisis. But as we deplete oil reserves in easy-to-reach places, and as the world economy grows (particularly rapid in developing countries like India and China), prices will inevitably rise as demand increases and supply stabilizes and eventually dips. The problem of Peak Oil will, sooner or later, undermine every sector of the U.S. (and indeed Global) economy. Our way of life is threatened. This goes beyond widescreen TVs and Hummers. At risk is food in our supermarkets, the heat in our homes, and the very ability as to communicate and travel across distances and thereby maintain social cohesion.



The Environment
Admittedly, environmentalism has a part to play in this discussion. The ecological harm done by oil exploration on both land and water is well documented. Further, the transport of oil can also cause severe harm to marine environments. Emissions of toxins and heavy metals such as mercury, lead and sulfuric acid into the air are a constant menace to public health.

Greenhouse gases are also cited as a major disadvantage of fossil fuels. Scientists overwhelmingly agree that carbon dioxide and other byproducts of fossil fuels use are leading to dangrous man-made climate change. Yet this is not a completely uncontroversial view politically: In the face of significant scientific evidence, a strong contingent of skeptics exist, in the U.S., primarily on the right of the political spectrum. Recent events such Climategate, a scandal where emails between scientists admitting to falsifying evidence to prove anthropogenic global warming may tend to further undermine public belief in the threat of Global Warming. Regardless of your belief in Global Warming, however, it is not necessary to the environmental argument for sustainable energy--in this respect it can be decoupled from Energy policy decisions. The human, plant and animal impact of fossil fuels--not mention economic impact--provide reasons enough to more actively pursue alternative energy solutions.


Manufacturing is the Key
The decline of U.S. manufacturing has resulted in heavy job losses and an increased trade deficit. Despite developing the first silicon transistor, the United States has fallen far behind Japan, which is the leading consumer electronics producer in the world. Similarly, the American auto industry has been decimated by better and cheaper foreign imports. Textiles and light manufactured goods are now made predominantly in developing countries. Even much of our agriculture is now internationally sourced.

This is not to say that trade is bad. Indeed, global trade in services is what has allowed the United States to achieve its economic dominance. However, the growth of services is no longer keeping pace with the job loss from outsourced manufacturing work, and the trade imbalances caused by importing far more than we export have not helped things. Nor are jobs the services sector immune to global trade; from the ubiquitous outsourced tech support to outsourcing legal research and litigation document reviews, many jobs are now done in India rather than domestically. While the U.S. still dominates in financial services, the recent economic crisis brings the continuation of the trend into question.

While the United States must undoubtedly work hard to retain its comparative advantage in services sectors and seek growth there, this will not be a complete solution. Given the state of the economy, major growth in the financial sector is unlikely--it is largely saturated. In order to balance the trade deficit and restore employment levels, America has to start manufacturing again. Given concerns about the use of fossil fuels generally and foreign oil in particular, green technologies provide the most obvious path to American competitiveness.


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Obama would do well to remember his commitments to the Alternative Energy Economy. It's time to make an investment in America's future. We've already tried throwing billions of dollars at banks who won't even let ordinary Americans out of predatory mortgages. While the stimulus may have stabilized the economy, it's not going to fix things, and it certainly won't lead to growth. The next step must be a wave of research grants, tax benefits and educational support to ensure that the next generation of green technology is developed and manufactured in the U.S., for export across the globe.