After last week's subpar gross domestic product report — a meager 1.8% in the first quarter of 2011 — it is getting harder and harder to support the Obama administration's notion that the U.S. economy is on the mend. (See: "Much to Be Encouraged About": Geithner Talks Tough on the Dollar, Deficits and More)
Sherle Schwenninger, director of economic growth and American strategy programs at the New America Foundation has some advice for our elected officials in Washington to help revitalize the U.S. economy. He actually has a four-point plan as laid out in his policy paper titled, "Winning the Prosperity". It includes the following:
#1: Invest in Public Infrastructure
#2: Create an Energy Efficiency Mini-Revolution
#3: Unleash Productivity Gains in Healthcare and Education
#4 Spur Global Demand for American Tech. and Capital Goods
In the interview above, Schwenniger and Aaron discuss the top two points more in depth. Most notable is Schwenniger's assertion that Obama's clean energy initiative, which is supposed to bolster competitiveness, create jobs and reduce our dependence on foreign energy sources, will actually drag on U.S. economic growth in the short- and medium-term.
He cites subsidies for clean energy programs as the main culprit for two reasons: opportunity costs and foreign investment, rather than domestic investment.
"The program subsidizes the commercialization of inefficient wind and solar technologies, many of which are produced abroad, while ignoring more efficient alternatives that would cut America's oil import bill and reduce the overall cost of energy in the United States," he writes in his report. "It makes no economic sense, for example, to subsidize the installation of imported wind turbines when natural gas fired generators can produce an equivalent amount of energy for one-third to one-half the cost." (See: What Energy Problem: U.S. Oil Exports Are on the Rise)
When he says "abroad" he really means China, where each month the government spends roughly $12 billion to develop clean energy sources. Our vast investment there is in reality a subsidy, but to China, as Aaron points out.
"China insists that if you are going to be able to tap their domestic market you have to produce there in cooperation with the Chinese companies," he says. "So, if you are thinking about locating a plant in Iowa or California or China, then that decision of excluding yourself from the Chinese market becomes very critical for a number of companies." (See: A New U.S. Energy Plan: Sell Oil Reserves, Use Profits to Invest in Clean Tech)
Right now, Schwenniger suggests focusing on a strategy that takes advantage of our "huge cornucopia of natural gas."
"Natural gas has the advantage of both being able to lower the cost of energy and reduce significantly carbon emissions. And it can be used directly for both electricity generation and transportation," he writes.
The other advantage of exploiting our vast natural gas resources is the creation of new jobs.
Tell us what you think! Do you believe the U.S. should focus on developing wind, solar or its natural gas resources?