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Shale Natural Gas Stimulates Economy As Federal Government Weakens the Recovery
Raymond Richman, 5/2/2013

The weekly report of actual initial unemployment insurance claims for the week ending April 27, 2013, coupled with the decrease during the previous week, showed that 298,692 claims were filed. A showing under 300,000 is consistent with a mild recovery; 250,000 or less would be more desirable. But the administration cannot claim credit. The boom in the natural-gas-from- shale industry, a private sector phenomenon opposed by the administration’s Environmental Protection Agency, is responsible. Serendipity has once again saved the American people from Washington’s idiotic policies.

The federal government has run budget deficits amounting to many trillions of dollars and the Federal Reserve has printed money like mad but it has hardly been enough to make a dent in our massive unemployment. It has barely accommodated new entrants to the labor force and has been so ineffective that involuntary unemployment is still  15 percent not the 7 percent the Department of Labor has been reporting because it does not count as unemployed people no longer looking for work.

The Keynesian policies pursued by the administration have been ineffective. Pres. Obama’s 2009 $800 billion economic stimulus ran out of stimulus as soon as the spending stopped. There was no Keynesian multiplier. And the massive annual government budget deficits had no Keynesian multiplier.

All the permanent jobs that have been created other than those in the wasteful federal government bureaucracy, were in the private sector. Serendipity has often saved the U.S. FDR’s new deal petered out as soon as the spending stopped. It was the new industries after World War II that gave us jobs and prosperity; automobiles, commercial aviation, television, air conditioning and other new home appliances, computers, new residential and office construction, new agricultural developments, produced the economic miracle not only in the U.S. but Europe as well, all but the Soviet bloc.

On balance, the government’s role was negative. It wasted trillions of  dollars on foolish and unnecessary urban expenditures, foolish environmental expenditures, business regulation. Not that everything the government spent its money on was wasted, the creation of the internet, for example. But so much of it was wasteful that on balance the government’s contribution to the economy was negative. What government did that was good was accommodating all the wonderful innovations in the private sector.

Every recession was caused by government policies and the Federal Reserve erroneous monetary policies. The latest, the financial crisis of 2007-8 was the result of the housing bubble initiated by government’s attempt to put people who could not afford them into new homes. Banking standards for sound loans were subverted. Loans were made a little or no interest and often, the sub-prime loans, above the market value of the properties. 

Real recovery is made possible by events in the private sector. The invention of horizontal drilling and fracking made it possible to exploit vast new deposits of petroleum and natural gas in shale. In a few years, the resulting increased output of natural gas and oil will make us as a nation energy independent. It is leading our recovery from the Great Recession.  

It is creating many permanent jobs not only in exploration and drilling but in transportation. Natural gas is a clean source of electricity generation, a clean fuel for powering trucks and buses and other motor vehicles. New pipe lines are being developed. In this connection, it is worth noting that the federal government has impeded the building of the pipe line from Canada to Texas at the instigation of its reactionary, anti-private enterprise environmental supporters. And the increased employment is generating an increasing demand for housing. New residential construction has begun to grow where jobs are being created.  

But serendipity is not enough. U.S. manufacturing employment is collapsing as a result of governmental policies. American manufacturing is limited to industries that need to be located domestically. Outsourcing of factories and jobs continues. As we’ve noted in these pages, our trade with other nations must be balanced and we’ve proposed the scaled tariff, a variable single country tariff that can be applied to countries with whom we have chronic trade deficits, China for example, that impose barriers to our goods and subsidizes exports to us.

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  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

    Journal of Economic Literature:

  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

    Atlantic Economic Journal:

  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]