Presumptive Republican presidential nominee Mitt Romney has leveled various accusations against the Obama Administration's policies on energy and the economy. He has called the administration out on everything from failed solar companies to failed Stimulus Packages. For Romney, and a lot of the Republican base, the president has chosen "winners and losers" in the market, thereby propping up failing industries that will inevitably go belly up. They believe that the administration's policies towards the economic recovery have failed solely because they were inadequate at lowering the unemployment rate and only added to a ballooning deficit. They assume, wrongly, that the administration is solely responsible for the current freeze in hiring and general economic malaise.
For a party that lionizes the free market, they have taken a very narrow view of it's area of affect. They have assumed, for political reasons (most likely), that commodities that are traded on the international market that often portend trends in international economic growth or stagnation do not apply to US markets. Do you remember when Newt Gingrich said he would magically create $2.50 gasoline? Derp.
The basic assumptions about commodities like coal, natural gas, oil, oil-based products, corn, soybeans, jet fuel and every other internationally traded commodity is that all countries who trade in those goods are affected by price fluctuations. In a recent interview with Platts, two international economists pointed out that the shale gas boom in the United States (and abroad) has been pushing lower quality Atlantic metallurgical coal into the international market, which has depressed the price of that commodity. Coupled with an overproduction of steel and piling surpluses of coal, production companies are experiencing depressed prices and lower profits. This, in part, led to the bankruptcy of Patriot Coal, whose reserves are heavy in eastern Atlantic met coal.
What does this all mean?
It means that the price and use of coal power is subject to the whims of the international market. It has entered a cycle whereby lowering domestic use of coal in the US is pushing surplus to the international market which is depressing the international price. This is not the result of the so-called "War on Coal."
Do you remember Solyndra?
Romney and Congress have used Solyndra as a way to target the Administration and it's use of tax-payer money. They believe that companies like Solyndra (and Renewable Energy, in general) are only propped up by political nepotism and government largess. Again, they fail to realize that the market had a big play in the failure of the company. At the time that Solyndra failed, the market was being flooded with cheap solar panels from China. Domestic solar panel companies could not compete and many, including Solyndra shut their doors.
While Republicans hammer at the Administration for the Solyndra failure, they do not point to the cost overruns of the coal-gas, carbon capture Taylor Energy Station (DOE - Private partnership), the nuclear guarantees to build reactors in South Carolina and Utah that have cost an extra $2-4 billion (That is nearly 4-6 Solyndras) and the failure to create a utility scale coal plant with Carbon Capture and Sequestration technology, despite millions of government funds for so-called "clean coal." In the same vein, they criticize the Administration for not creating jobs, yet they are willing to eliminate tens of thousands of jobs in the Wind industry by not approving the Production Tax Credit. I digress...
Romney has been hammering the Administration's policies on the economy since he announced his bid for president. For every month that the US has released a sub-par job report, the Romney camp has attacked. For every bankrupt company, depressed mill town and broke farming community, Romney has towed the line that the President is the sole creator of the Recession and the current slow recovery.
Here is what is happening in the international market:
1. Greece Bailout
2. Spanish Bailout
3. LIBOR rate fixing
4. Portugal and Ireland economic troubles
5. Electoral uprising in EU (France, Greece, etc)
6. Chinese economic slowdown
7. EU recession
8. US "fiscal cliff" (Sequester cuts, Payroll tax expiration, Bush Tax Cut expiration, etc)
What does this mean for the US and the "small businesses" that Romney loves? Uncertainty. It means uncertainty in the rate of exports to China. It means uncertainty in EU bond markets. It means financial uncertainty in the EU economy. It means uncertainty in the international market.
When businesses are uncertain, they will retain cash and forego hiring until things are certain. But, there is one certainty about the international market: No matter what the Administration does, it cannot affect the long-term health of the EU or China. If these economies falter, our economy falters.
Congress has the power to institute measures to improve job growth and soften the effect of the slow recovery on the economy. But, what did Congress do this week instead of looking at stimulative measures? They repealed Obamacare...for the 33rd time...
I suppose we will all have to wait until November...
