The following is, or could be, a transcript from a high school history teacher’s lecture in the year 2030 on Obama’s first term.
Having entered office in July of 2009, newly elected President Obama was put in a very tough spot. Presented with an economy plagued by recession, financial crisis, the threat of inflation, and calls for vast social reform, the Obama Administration was forced to prioritize.
After conferring with economic advisors, new Treasury Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke, the administration had good reason to believe that the tools possessed in the vast arsenals of these agencies had been strategically deployed, and would slowly guide the economy away from further calamity.
So, having received his mandate for social reform from the American people in the election of 2008, Obama and his team went to work on reshaping social policy in America, particularly with regard to climate change and healthcare, with the hope of letting the economy take care of itself, under the close supervision of Geithner, Bernanke, and others.
However, by the fall of 2009, it was evident that would not happen, that the economy would not right itself, and that the administration would be forced to reevaluate, knowing that the economy is always goal number one, and that social reform cannot be achieved in the absence of stable economic activity.
At that point, Obama and his team were faced with a decision, their first option to continue pursuing a socialist agenda, holding onto the naïve belief that the economy would fix itself. Had Obama taken this course of action and the economy not improved, the Democrats would have lost Congress at the next midterm election in 2010, leaving Obama a neutered, lame-duck President for the final two years of his term, at which point the Democrats would have most certainly lost the White House.
Obama’s second option, and the one we know from history that he [correctly] pursued, was to redirect the focus of his first term toward bolstering the American economy.
Now, at that time energy was a very controversial issue, between speculation, regulation, and carbon footprints. Many people, mostly in the US, were pushing very hard for new regulations that would force energy companies to become more environmentally friendly.
And take it from me, because I was there and I lived through it, when I tell you that at that point in time, global warming, as it was called back then, was a religion, not a science. Up until then everything, the economy included, had taken a backseat to the environment – until the Obama Administration led the change.
At that point, what will certainly go down as a tipping point in American history, some key members of the administration, in a magnificent change of direction, decided to take a hard line with environmental lobbyists, much of their work having come into question (Gore dodges questions at environmental journalist conference, Michael Krebs).
Obama and his staff began independently reviewing research conducted on the environment and found that, while there was a time when evidence of global warming abounded, by 2009 the case had changed. The polar ice cap summer melt rates had been falling for several years (Polar icecap is melting at slower rate…, Mike Swain), the Pacific Ocean had begun to cool (Whatever happened to global warming…, Daily Mail), and arctic polar bear populations, which were at the time a key indicator used by environmentally-conscious Americans, had actually been expanding (Federal Polar Bear Research Critically Flawed…, Institute for Operations Research and the Management Sciences).
Aside from the obvious environmental implications, energy was a major issue for still other reasons. By 2009, many Americans were growing upset that their country had been exporting so much money to conflict-regions – including the Middle East and Venezuela – in exchange for oil and other forms of fuel over the preceding decades.
In the first nine months of 2009 alone there had been over 200 major oil finds worldwide including several in the Gulf of Mexico, one of which may have been the largest deposit ever (The Oil Industry Sets a Brisk Pace…, Jad Mouawad). Meanwhile, the price of natural gas was ready to fall through the floor, not just due to the numerous finds, but the advent of technology allowing companies to more efficiently extract gas deposits.
One single natural gas discovery in northern Louisiana alone revealed enough natural gas that, with the new technology available, was equivalent to 33 BILLION barrels of oil, which was about 18 years worth of all oil production in the United States at that time (U.S. Gas Fields Go from Bust to Boom, Ben Casselman). Of course, there were also major finds in Texas, Arkansas, and Pennsylvania, making the supply of natural gas on – or under – American soil sufficient to fulfill demand in the US for nearly a century.
Now, we must remember that at the time – remember we’re talking about the fall of 2009, Obama has only been in office for 9 months and already the country is viscously divided – the U.S. economy had slowed to a near standstill. Consumers, who had carried the burden of excess debt for decades, simply were not capable of rescuing the economy through spending. Around mid-2009 statistics had showed a halt to the flow of consumer credit, due in small part to banks’ hesitations about lending, but even more-so to Americans’ lack of demand for loans.
American corporations, despite sitting on $14 trillion in early 2009 – I know it doesn’t seem like much now, but at the time that was a year’s worth of GDP – simply could not be convinced to tap into those funds, even to invest in future growth (Where Consumers Fail, Can Businesses Lead?, Gongloff).
Obama knew that despite all odds, he had no reasonable alternative but to take the bull by the horns and attempt to rescue the economy himself, using one of his most powerful tools to do so – policy. By late 2009, it was clear to Obama and most other Americans that the environmentalist crowd, despite their good intentions, simply would never be won over by the more economically-minded. With their lobbyist, celebrity advocates, and protest crowds, and despite ignoring a good deal of facts that weakened their arguments, environmentalists at that time had a much louder, more resounding voice than the silent majority.
As a student of history, Obama of course recognized that he faced a predicament frighteningly similar to that faced by President Jimmy Carter just thirty years before. Obama remembered the gas lines under Carter’s terrible energy policy, and knew that he could not go the way of his predecessor as a one-term President who took his party out of power for the next twenty years, while his successor would be remembered for fixing the problem.
Obama could not have his own equivalent of Ronald Reagan, who was given credit for quickly cutting the price of gasoline in half. Obama knew he could fix the mess himself, even reducing the cost of energy in the long-term, which would ultimately return the United States to its place of prominence among the world’s manufacturing nations.
With all this in mind, Obama – always the consummate politician – undertook a major shift in policy; one which ultimately saved the US economy, his administration, and his party. After some impeccably executed and carefully choreographed political maneuvering, Obama was able to make American energy independence goal number one for his administration, which they resolved to do using all means necessary, including so-called green energy, mostly wind and solar, as well as the not-so-green like oil, natural gas, coal, nuclear, and offshore drilling.
As an added bonus, Obama’s administration was able to shape numerous programs to incentivize technology innovations in the energy sector. Most noticeably, there were many tax breaks offered to companies that invested significant assets in lowering the environmental impact of their respective fuels, with particular focus going towards cleaner-burning coal.
Obama’s focus on energy was simply brilliant, as was his ability to work out an acceptable solution for everyone. He knew that if he could loosen restrictions on the energy sector – even for just a few years – to give companies and individuals the leeway and incentives to expand the industry and achieve energy independence that more money would follow, flowing into investments designed to improve technology and curtail carbon emissions.
Under Obama’s supervening plan of action, job number one was the economy, since without a strong economy there simply would be no money – much less incentive – to invest in green technology. By holding off on social reform, the administration knew they could save the economy, which would give them time to garner support and credibility to be used later on to achieve their objectives of shaping social policy.
Furthermore, Obama and his administration realized just how many peripheral industries would be helped by a massive expansion in the energy sector. Resolving to build five new nuclear plants across the country, encouraging offshore drilling, and loosening restrictions on coal, natural gas, and oil refineries – temporarily – all combined with the already burgeoning areas of wind and solar power, had an immediate impact.
As a result, due solely to a temporary loosening of the leash, Obama and his team created a sudden and incredible demand for raw materials that would be needed for construction, engineers to design new facilities, construction crews to build them, not to mention ancillary companies required to feed and house those construction crews.
Once facilities started opening there was still more job demand to staff new plants, and all these new employees needed food, homes, and health insurance. As plants got up and running successfully those same employees found themselves with disposable income, which meant new demand for major purchases like flat-screen TV’s and new cars.
Of course, we can’t forget that now transportation companies were needed to help move and manage these fuels around the country, whether it was oil that needed to be moved cross-country by truck or rail, new pipelines that needed building to handle increased flow of natural gas, or companies managing the flow of electricity generated by nuclear plants, solar panels, and wind farms placed strategically across the country.
And so it went that through the single action of temporarily loosening environmental restrictions that President Obama was able to manufacture a massive trickle-down effect, by which he single-handedly saved the US and perhaps the global economy. Obama later went on to mold social reform later with new support and added credibility, earning the Nobel Peace Prize that was bestowed on him somewhat prematurely and shaking off his haunting image as a glorified community organizer and reserve his place among the greatest presidents in U.S. history.
OK, class, that’s all for today.
This blog is written weekly by Dock David Treece, a registered investment advisor with Treece Investment Advisory Corp. It is meant to share insight of investment professionals, including Dock David and his father, Dock, and brother, Ben, with the public at large. The hope is that the knowledge shared will help individuals to better navigate the investment world.