An Economic String Theory For America

There are three distinct and big questions that people need help with to get a grip on what is happening in the US today and its effect on them.

First, what further bad could happen in financial markets? Second, how long might it take for the economy to seriously turn and recover? Third, what prescription can be applied to the country to stimulate as early a recovery as possible?

There is currently a sense and hope that the stock market may be making its lows now. If that were likely, the prospects for the underlying economy could be seen in a more promising light now too, as the stock market [with the aid of hindsight] has always been a leading indicator. But hindsight is not yet available. And, one cannot rule out a further drop if and when earnings across the board are down in 2009. Sorry! But, we really do have to deal with reality.

If our national wealth contraction moves even lower, additional questions arise about how long the economy may lie fallow. There is a basic principle to bear in mind. Markets must clear before they can resume normal levels. Today we see something like 12,000,000 “endangered” houses, where the value of the mortgage exceeds the value of the property. It is unlikely that new housing starts can begin to get back to near normal levels of around 1.4 million units annually until a large proportion of the 12 million “endangered” units stabilize in value or have been absorbed by stronger owners or refinanced. And, demographics are not helping either. Even the experts today have no idea how long that could take. But, it may take, optimistically, 3-5 years?

So now we have a grim couple of thoughts to deal with –a loss of more of our national wealth AND the prospect of an economy that may take another 3-5 years to clear and begin to recover.

Granted there is an instinct to curl into a fetal crouch and put our hands over our eyes. But, in fact this is the very moment for us all to stand tall, yell whoopee and charge!!

Our challenge and opportunity is very clear. We must push and pull hard on the string which leads to rebuilding and modernizing our whole national infrastructure. While we have been gorging on misleading free lunches of cheap loans for housing and no money down on new gas guzzling SUVs and unlimited credit card spending for exotic vacations and Gucci bags, the world around us has been crumbling down. Our bridges, tunnels, railroads, schools, hospitals, new energy sources and other outdated transportation systems have been languishing for a long time because they did not represent exciting investment opportunities.

Now, as long as we are going to have to wait for the economy and financial markets to recuperate, our opportunity is to fix up the world that will surround us when things have turned for the better. It almost seems that some divine providence may have visited our present predicament on us just to create the opportunity to address the needs of our national infrastructure. So we should not think about the plans for stimulation of the economy as some distasteful castor oil medicine we must endure. We should be yelling halleluiahs of thanks for the opportunity.

It may not be long before almost 1 in 10 people are out of work. When that happens, almost everyone will know someone who IS out of work and a lot of people will begin to think that they may be the next. So we all should welcome the biggest “public works” packages in history. President-elect Obama has already proposed a $250,000,000,000 package. We should all start rooting for even bigger packages.

This will take a lot of new plans and methods to make such a massive scale of spending work well. The purpose is not to enrich lucky contractors. The purpose is to create a lot of jobs for engineers, architects and ordinary people who roll up their sleeves and make it all happen. We may need some new entities like the Reconstruction Finance Corporation from the 1930s. We should be open minded and creative in how to do all these exciting new projects. And, the ultimate purpose is not to just create jobs for a recovery but to remake the world we will live in when the recovery arrives.

So let’s feel good about tightening our belts and buckling down to creating our new future. On this flight “we will have a good time”.

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A Very Interesting Bus Ride

Floyd Norris’ piece in the New York Times on Saturday October 18 on how voters see the crisis bailout, demonstrated with simple poll charts, makes clear that the public has failed to grasp the connection between “the banks” survival and their own.

A simple metaphor may help convey and clarify that connection in a way that more people may “get it”.

Think of the present overall economic/financial situation as a BIG bus powered by a gasoline engine with the US population on board. The two ingredients that enable that engine to power that bus are gasoline and motor oil. The gasoline provides the energy to propel the bus. The motor oil lubricates the engine in order to enable it to run smoothly. If and when the motor oil gets too low, there is a real risk the engine may seize up and ultimately freeze altogether. And if the motor oil leaks out completely, the bus comes to a complete stop and has to go to the repair shop for quite a spell.

Well, our “real economy” or Main Street, is made up of all our factories, offices, farms, schools, hospitals etc and provide our jobs, incomes and purchasing power and in effect provide the gasoline for the bus engine.

Similarly our financial system, or Wall Street, which provides the money, or cash that enables all those factories, offices etc to pay wages, maintain inventories and generally pay bills to be healthy and grow is the motor oil which lubricates the bus engine to keep it running smoothly.

So we are all on this bus together, whether we know it or like it.

And then suddenly the motor oil begins to run low. The bus driver [ the President of the United States] begins to notice the gauge of motor oil levels is falling rapidly. That is caused by our financial system beginning to choke on an extended period of over borrowing and lending coupled with rapid declines in housing and commodity prices. So the bus driver spots a filling station coming up and heads in to learn more about the problem.

The attendants in the filling station [the Congress] started looking at the problem as the bus engine is still coughing and sputtering almost to a stop. The attendants had not had much experience with buses running out of oil because it had been over 50 years since they had seen a bus in such shape.

In the meanwhile the passengers on the bus [all of us from Main Street and everywhere] began to notice that the bus was getting behind schedule and the trip might take a lot longer than they had planned so the water bottles and sandwiches they had with them might not last for the whole trip. Astutely, most of those passengers began to drink and eat less to make sure they would not starve before they got “there”.

As a result they bought less water and sandwiches in the filling station shop. And, the owner of that shop started to worry about how he was going to pay his bills.

Finally the attendants in the filling station figured out the problem and started to address it. They put more gas in the tank [by creating an economy stimulus package] and refilled the engine oil reservoir [by creating a capital replenishment plan for the nation’s banks].

And, then the bus engine slowly began to sound better and after some gnashing of gears the bus seemed to be getting underway again. At that point the passengers felt a bit better and started to sip their water and nibble on their sandwiches again. And the station shop keeper also breathed a sigh of relief.

That is about where we are today. It seems clear from the bus analogy that all the bus passengers probably are better off for having stopped at the filling station even though some passengers might have been hoping for more gas and less motor oil while others were the other way around. Perhaps that is what makes horse races!

In the meanwhile the stock market had gone down a lot, wrecking havoc with many passengers 401ks and causing a lot of those passengers to cancel future bus trips. Then the folks that supplied the filling station gas realized that there would be fewer bus trips, at least for awhile, and started to lower the price of gas, which by itself became another stimulus for our real economy.

Finally, with a Presidential election looming shortly, with the prospect of a young, brilliant new President/bus driver most of the passengers began looking forward not backwards and began again to plan ahead again with hope and optimism.

So let’s hope more people will think about today’s situation in bus togetherness terms, not we versus them, because that state of mind cannot solve the problems we all share today. Norris was dead on to point out this problem. Acknowledging is a big first step. Now it must be addressed. Hopefully, if we all think about the bus we can make some progress.

Frank A. Weil -Former Assistant Secretary, US Department of Commerce and Chair of Abacus & Associates a private investment firm in New York City—212 230 9801 or 202 338 6007

Can We Obtain Energy Independence, Address Global Warming, and Help the Economy All at the Same Time? Yes! How? Here’s How…

The last 100 years have seen wave after wave of innovation of all kinds build one on another to create in the aggregate an amazing economy and society. The discovery of petroleum was followed by electricity. Electricity begat telegraphy, which led to the telephone. The telephone was followed by radio. Mixed in along the way were the internal combustion engine, aviation, mass production of nearly everything, improved agricultural productivity and the beginnings of social progress. And then came television and modern telecommunications and with that modern politics and a vast spread of wealth from modern finance which in part sprang from main frame computers and then morphed into personal computers which enabled everything. And, as if all of the above were not enough, the internet arrived and unified and multiplied everything which spread the greatest levels of wealth and democracy ever achieved in the world into every house and parking space in America.

And those parking spaces are where today’s story begins. With all the distributed wealth in America we now consume 20 million barrels of oil A DAY to fuel all the activities in our phenomenal society. And, about half of that oil we have to import from abroad because our domestic resources are insufficient to meet our needs. And, that is where our current problem has become fundamentally crucial and very serious. Largely because of our dependence on foreign energy sources, we are running a substantial financial deficit with the world in that all of what we buy from abroad exceeds what we sell. That deficit, which is very large and getting larger, in turn has weakened the dollar to the point that the cost of all our imports, energy as well as other goods and services, has risen enormously and will continue so to do ever more in a vicious cycle as the dollar inevitably weakens more. As far as the eye and mind can see that problem will continue to get worse — unless. Unless, we can break our dependence on foreign source energy by finding/using new sources of domestic energy, or substantially reducing our basic standard of living by using less foreign oil. Ironically, today our biggest economic challenges spring from our extraordinary successes over the past 100 years. And, while it is true that our balance of payments deficit may not prove to be fatal from an economist’s point of view, if our economy responds rapidly enough to the weaker dollar, why risk all the social damage that inevitably must occur to achieve that adjustment, if there is a reasonable way to avoid that risk.

Jared Diamond has shown us what happened only hundreds of years ago to some Eskimos, certain early Indians on our continent and virtually all the inhabitants of Easter Island, when those populations failed to heed many signs of their ultimate doom right under their noses. Our inability to heed the need to become energy independent by adopting a widely understood and agreed national strategy may be the most overriding problem facing the nation today.

While each wave of change built on the waves that preceded it, none of our original waves of innovation really ever became reinvented and took off on a new and much larger second life — until now.

The new, larger and reinvented life of one such previous wave that is coming — has to come, if we are to deal effectively with the energy challenge that puts our entire future at risk — is electricity. About half of our daily consumption of oil, or roughly ALL of the foreign oil we import, is used to fuel our some 240 million vehicles.

As we develop new and efficient ways to create, distribute and use more electricity, which is obviously already a major staple in our lives except for most transportation means, we can over the next 15/20 years replace virtually all oil in almost all our transportation vehicles, mainly the 240 million cars and trucks [excluding only aircraft and military vehicles as necessary] and once again become truly energy independent. That would be the second wave for our old dependable friend, electricity. And, behold, if we achieve that goal, we will at the same time have made a serious dent in another crucial priority– global warming, by essentially eliminating emissions from those vehicles.

That same result also will strengthen the dollar and protect and continue our way of life and standard of living. As we show the world we are dead serious about replacing oil in our transportation systems, the dollar will soon begin to strengthen and should bring some relief in the cost of all our imports, both oil and other things, as we proceed with rolling out our new electricity policy, even though that will take more than a decade. As the foreign source petroleum world recognizes the handwriting on the wall, they will inevitably become more competitive and oil prices will respond accordingly. We must be alert to that fact and not allow any relief from peak oil prices to deflect us from our long term goal of virtually complete foreign energy independence, which relief periodically has been delaying us for the last decade and in large part is why we are in our present mess.

We have many ways to create electricity for the future —wind, solar, coal, tar sands, hydro, atomic, geo-thermal and burning of waste. We need not, must not, defer declaring an ELECTRICITY goal until the market place has fully resolved which methods are the optimal, ultimate means to deploy to achieve that goal. Along with a clear long term electricity goal, we must embark immediately on interim goals, to stimulate each potential energy source, geared to appropriate time lines that will in the aggregate get us to the ultimate goal in 2025.

All of this is well within our capability and is definitely not pie in the sky. We will need to harness the focus of government power with the genius of the market place to orchestrate all the energy sources currently available to create sufficient electricity to meet our national goal.

We have today 103 atomic electric power generation plants in the US which supply about 20% of our current electricity consumption. [Incidentally, France makes 75% of its electricity from atomic power, Japan 30% and Germany 33%].  We have been stalled for 25 years in expanding our atomic based power, primarily due to political gridlock growing out of largely irrational fear and “Not In My Back Yard.” During these last 25 years virtually all the technical concerns and fears with atomic power generation have been addressed satisfactorily and solved here in the US and abroad, including how safely to deal with waste, operations and security and build new such plants faster and cheaper than was earlier believed. Of course, there will always be some residual risks, but we must be very careful to balance the risk of doing nothing more with this promising source of electricity against the increasingly minimal risks of taking steps necessary to securing our energy independence.

Now, only the hardest part remains, which is public education. That has to begin with political leadership. That leadership must first address the whole country with all the current facts and then present and drive the country towards a consensus on both the clear and present dangers we face and solutions bottomed on electricity. There is no better time to do that than during a Presidential election, which can focus the issues and create the necessary mandate to enable change.

Halfway measures of conservation and partial alternatives have been in the pipeline in recent years and have gotten us into the present mess by failing collectively to deliver material relief and have thus delayed a basic address to the problem. We continue to hear talk about the need for a broad energy policy but so far no focused, manageable, clear policy has been described or put forward.

Today there is already a lot of intelligent and useful talk about cap and trade, price floors, windfall profit taxes and carbon taxes—all of which are very important possibilities and will be essential elements, in appropriate ways, to making the implementation of an electricity policy feasible and economic. However, those steps taken with only market forces doing the steering of the big energy ship, we are very unlikely to move the needle sufficiently, without distorting the economy and/or creating some social disruptions.

Yes, we do need an energy policy; and it must be based on electricity. So why not simply call it an Electricity Policy? And, in addition give it the standing and governmental support we have given such challenges in the past such as the Manhattan Project and the Space Program.

Beyond atomic power, as noted above, we also can expand the creation of electricity from wind and solar methods. At the moment we are not globally competitive in those technologies, and we should be. The Sun can supply in the aggregate enough energy [electricity] in a day to power the whole world for a very long time, when we finally someday learn properly to harness it. But we cannot just hope and wait. In the meanwhile, a great deal of progress has been made in these types of endeavors by both government and private industry. That progress can be greatly accelerated by a national commitment to an Electricity Policy. But, we must recognize the present day limits of both wind and solar and not expect too much too soon and again defer the overall basic goal simply in hopes of a breakthrough in technologies. Hydro power is in some ways the best, [certainly the cleanest and sometimes the cheapest and safest in the long run] but we are at the mercy of geography which limits the number of places it can be achieved. Yet, some great old ideas are now being reconsidered, for example, the gigantic tides in the Bay of Fundy can be harnessed and ‘forever’ supply lots of electricity to us and Canada at very low operating costs.

And, we have enormous amounts of coal and tar sands domestically, but both sources require enormous amounts of energy to be extracted efficiently and both have serious environmental problems to be overcome. Still, we must also aggressively seek to utilize these sources as well. The same can be said of the burning of waste.

The core of an Electricity Policy almost surely must be strongly rooted in atomic power, since it has the potential of being the major source, other than petroleum and coal. Also it has the greatest potential to provide both sufficient electricity and be clean, efficient and achievable at the same time. In addition atomic power plants can collaterally produce excess electricity at night to desalinize sea water to meet fresh water shortages in many parts of the country, which are growing rapidly. It can also similarly be used to extract hydrogen from sea water for use in fuel cells, which in fact create portable electricity.

Which sources of electricity should be the winners is not a main goal of this paper. One of the reasons we have made so little progress up to now towards an energy policy is that the historically clumsy process of sorting out winners from losers has deflected us from the overall goal. Having a clear, focused overall national electricity goal will help to drive that sorting out process much more quickly and effectively.

We have already seen more than the beginnings of hybrid automobiles and the first serious examples of all electric cars are already beginning to appear on the market. Government cannot/ should not seek to build cars but government can help to create the conditions that can enable that to happen and speed up that process.  Converting virtually all our autos and trucks to electricity will require rapid advances of both efficient transmission and storage of electricity. In addition a great deal of new basic electricity infrastructure all around the country will be required for all our present non- transportation uses. Our national electric grid is already staggering and when in due course we ‘plug in’ 240 million vehicles, it could very well collapse, unless it has been strengthened as the process of all electric vehicles unfolds. This will require major infrastructure enhancements of the national grid which are already needed. This is yet another reason for an electricity policy. A lot of that development is already underway and that too can be sped up and brought to reality with more and better cooperation between government and private industry.

Our need for a national consensus on an Electricity Policy now requires two things [1] to start very soon to become completely energy independent no later than 2025 by using electricity derived from all sources, and [2] a willingness to harness the power and genius of government’s unique focusing capabilities to lead and enable the genius of private industries’ extraordinary ability to make things happen when the right conditions exist.

That will require reinventing and creating a whole new wave of the use of electricity as the main power source of our whole society, including most transportation, to continue the way of life we all want, as far as hope and imagination can reach, by successfully addressing our energy independence, global warming and foreign source energy problems, all at the same time.. Let’s go America!

CAN WE OBTAIN ENERGY INDEPENDENCE, ADDRESS GLOBAL WARMING, AND HELP THE ECONOMY ALL AT THE SAME TIME??…YES!!!…HOW????

‘IT’S ALL ABOUT ELECTRICITY, STUPID!’

ELECTRICITY POLICY PAPER

 _________________________________________

Summary

This paper presents an ELECTRICITY POLICY as a new way of thinking about, presenting, and POLITICALLY dealing with the long standing and vexing USA energy conundrum. If we are to heed Jared Diamond’s sound warnings in “Collapse” about waking up to our foreign oil consumption blindness, we need a single, FOCUSED, widely understandable and achievable long- term GOAL which would underpin a long term Manhattan Project-like approach to solving our energy problem no later than 2025. Electricity in fact has been the main form in which most energy is transmitted and used except for transportation’s 240 million cars and trucks.

For years we have floundered, perhaps with decent intentions, by pursuing the energy problem with an unfocused broad menu of differing approaches and oftentimes conflicting policy objectives. It is within the nations reach to change that by focusing the country on one undeniable, overriding goal based on—ELECTRICITY to be used in virtually all the nation’s vehicles.

If we do this, we can achieve a triple play by

[1] reducing green house emissions

[2] getting control of our balance of payments, and

[3] becoming energy independent.

All simultaneously by substituting electricity instead of foreign source petroleum. Which methods to be employed to make this happen are, of course, crucially important; however, the clear first step is to get agreement on the overall goal. That should help set the stage to attacking the methods in a more rational and coordinated way than we have managed to date.

MAIN CASE

The last 100 years have seen wave after wave of innovation of all kinds build one on another to create in the aggregate an amazing economy and society. The discovery of petroleum was followed by electricity. Electricity begat telegraphy which led to the telephone. The telephone was followed by radio. Mixed in along the way were the internal combustion engine, aviation, mass production of nearly everything, improved agricultural productivity and the beginnings of social progress. And then came television and modern telecommunications and with that modern politics and a vast spread of wealth from modern finance which in part sprang from main frame computers and then morphed into personal computers which enabled everything. And, as if all of the above were not enough, the internet arrived and unified and multiplied everything which spread the greatest levels of wealth and democracy ever achieved in the world into every house and parking space in America.

And those parking spaces are where today’s story begins. With all the distributed wealth in America we now consume 20 million barrels of oil A DAY to fuel all the activities in our phenomenal society. And, about half of that oil we have to import from abroad because our domestic resources are insufficient to meet our needs. And, that is where our current problem has become fundamentally crucial and very serious. Largely because of our dependence on foreign energy sources, we are running a substantial financial deficit with the world in that all of what we buy from abroad exceeds what we sell. That deficit, which is very large and getting larger, in turn has weakened the dollar to the point that the cost of all our imports, energy as well as other goods and services, has risen enormously and will continue so to do ever more in a vicious cycle as the dollar inevitably weakens more. As far as the eye and mind can see that problem will continue to get worse —unless. Unless, we can break our dependence on foreign source energy by finding/using new sources of domestic energy, or substantially reducing our basic standard of living by using less foreign oil. Ironically, today our biggest economic challenges spring from our extraordinary successes over the past 100 years. And, while it is true that our balance of payments deficit may not prove to be fatal from an economist’s point of view, if our economy responds rapidly enough to the weaker dollar, why risk all the social damage that inevitably must occur to achieve that adjustment, if there is a reasonable way to avoid that risk.

Jared Diamond has shown us what happened only hundreds of years ago to some Eskimos, certain early Indians on our continent and virtually all the inhabitants of Easter Island, when those populations failed to heed many signs of their ultimate doom right under their noses. Our inability to heed the need to become energy independent by adopting a widely understood and agreed national strategy may be the most overriding problem facing the nation today.

While each wave of change built on the waves that preceded it, none of our original waves of innovation really ever became reinvented and took off on a new and much larger second life–until now.

The new, larger and reinvented life of one such previous wave that is coming—has to come, if we are to deal effectively with the energy challenge that puts our entire future at risk—is ELECTRICITY. About half of our daily consumption of oil, or roughly ALL of the foreign oil we import, is used to fuel our some 240 million vehicles.

As we develop new and efficient ways to create, distribute and use more electricity, which is obviously already a major staple in our lives except for most transportation means, we can over the next 15/20 years replace virtually all oil in almost all our transportation vehicles, mainly the 240 million cars and trucks [excluding only aircraft and military vehicles as necessary] and once again become truly energy independent. That would be the second wave for our old dependable friend, electricity. And, behold, if we achieve that goal, we will at the same time have made a serious dent in another crucial priority– global warming, by essentially eliminating emissions from those vehicles.

That same result also will strengthen the dollar and protect and continue our way of life and standard of living. As we show the world we are dead serious about replacing oil in our transportation systems, the dollar will soon begin to strengthen and should bring some relief in the cost of all our imports, both oil and other things, as we proceed with rolling out our new electricity policy, even though that will take more than a decade. As the foreign source petroleum world recognizes the handwriting on the wall, they will inevitably become more competitive and oil prices will respond accordingly. We must be alert to that fact and not allow any relief from peak oil prices to deflect us from our long term goal of virtually complete foreign energy independence, which relief periodically has been delaying us for the last decade and in large part is why we are in our present mess.

We have many ways to create electricity for the future —wind, solar, coal, tar sands, hydro, atomic, geo-thermal, burning of waste and use of ethanol. We need not, must not, defer declaring an ELECTRICITY goal until the market place has fully resolved which methods are the optimal, ultimate means to deploy to achieve that goal. Along with a clear long term electricity goal, we must embark immediately on interim goals, to stimulate each potential energy source, geared to appropriate time lines that will in the aggregate get us to the ultimate goal in 2025.

All of this is well within our capability and is definitely not pie in the sky. We will need to harness the focus of government power with the genius of the market place to orchestrate all the energy sources currently available to create sufficient electricity to meet our national goal.

We have today 103 atomic electric power generation plants in the US which supply about 20% of our current electricity consumption. [Incidentally, France makes 75% of its electricity from atomic power, Japan 30% and Germany 33%].

We have been stalled for 25 years in expanding our atomic based power, primarily due to political gridlock growing out of largely irrational fear and “Not In My Back Yard.” During these last 25 years virtually all the technical concerns and fears with atomic power generation have been addressed satisfactorily and solved here in the US and abroad, including how safely to deal with waste, operations and security and build new such plants faster and cheaper than was earlier believed. Of course, there will always be some residual risks, but we must be very careful to balance the risk of doing nothing more with this promising source of electricity against the increasingly minimal risks of taking steps necessary to securing our energy independence.

Now, only the hardest part remains, which is public education. That has to begin with political leadership. That leadership must first address the whole country with all the current facts and then present and drive the country towards a consensus on both the clear and present dangers we face and solutions bottomed on electricity. There is no better time to do that than during a Presidential election, which can focus the issues and create the necessary mandate to enable change.

Halfway measures of conservation and partial alternatives have been in the pipeline in recent years and have gotten us into the present mess by failing collectively to deliver material relief and have thus delayed a basic address to the problem. We continue to hear talk about the need for a broad energy policy but so far no focused, manageable, clear policy has been described or put forward. Now we have seen and heard of the attraction of ethanol as at least a partial substitute for fossil fuel. There are some merits to that idea but it is limited by the overall amounts that could ever be realistically achieved, by the unintended consequence of driving up food prices generally and by the fact that the emissions from ethanol also have their own adverse consequences.

Today there is already a lot of intelligent and useful talk about cap and trade, price floors, windfall profit taxes and carbon taxes—all of which are very important possibilities and will be essential elements, in appropriate ways, to making the implementation of an electricity policy feasible and economic. However, those steps taken with only market forces doing the steering of the big energy ship, we are very unlikely to move the needle sufficiently, without distorting the economy and/or creating some social disruptions.

Yes, we do need an energy policy; and it must be based on electricity. So why not simply call it an Electricity Policy? And, in addition give it the standing and governmental support we have given such challenges in the past such as the Manhattan Project and the Space Program.

Beyond atomic power, as noted above, we also can expand the creation of electricity from wind and solar methods. At the moment we are not globally competitive in those technologies, and we should be. The Sun can supply in the aggregate enough energy [electricity] in a day to power the whole world for a very long time, when we finally someday learn properly to harness it. But we cannot just hope and wait. In the meanwhile, a great deal of progress has been made in these types of endeavors by both government and private industry. That progress can be greatly accelerated by a national commitment to an Electricity Policy. But, we must recognize the present day limits of both wind and solar and not expect too much too soon and again defer the overall basic goal simply in hopes of a breakthrough in technologies. Hydro power is in some ways the best, [certainly the cleanest and sometimes the cheapest and safest in the long run] but we are at the mercy of geography which limits the number of places it can be achieved. Yet, some great old ideas are now being reconsidered, for example, the gigantic tides in the Bay of Fundy can be harnessed and ‘forever’ supply lots of electricity to us and Canada at very low operating costs.

And, we have enormous amounts of coal and tar sands domestically, but both sources require enormous amounts of energy to be extracted efficiently and both have serious environmental problems to be overcome. Still, we must also aggressively seek to utilize these sources as well. The same can be said of the burning of waste.

The core of an Electricity Policy almost surely must be strongly rooted in atomic power, since it has the potential of being the major source, other than petroleum and coal. Also it has the greatest potential to provide both sufficient electricity and be clean, efficient and achievable at the same time. In addition atomic power plants can collaterally produce excess electricity at night to desalinize sea water to meet fresh water shortages in many parts of the country, which are growing rapidly. It can also similarly be used to extract hydrogen from sea water for use in fuel cells, which in fact create portable electricity.

Which sources of electricity should be the winners is not a main goal of this paper. One of the reasons we have made so little progress up to now towards an energy policy is that the historically clumsy process of sorting out winners from losers has deflected us from the overall goal. Having a clear, focused overall national electricity goal will help to drive that sorting out process much more quickly and effectively. And various methods will, of course, need to be employed in the transition process envisioned.

We have already seen more than the beginnings of hybrid automobiles and the first serious examples of all electric cars are already beginning to appear on the market. Government cannot/ should not seek to build cars but government can help to create the conditions that can enable that to happen and speed up that process.

Converting virtually all our autos and trucks to electricity will require rapid advances of both efficient transmission and storage of electricity. In addition a great deal of new basic electricity infrastructure all around the country will be required for all our present non- transportation uses. Our national electric grid is already staggering and when in due course we ‘plug in’ 240 million vehicles, it could very well collapse, unless it has been strengthened as the process of all electric vehicles unfolds. This will require major infrastructure enhancements of the national grid which are already needed. This is yet another reason for an electricity policy. A lot of that development is already underway and that too can be sped up and brought to reality with more and better cooperation between government and private industry.

Our need for a national consensus on an Electricity Policy now requires two things [1] to start very soon to become completely energy independent no later than 2025 by using electricity derived from all sources, and [2] a willingness to harness the power and genius of government’s unique focusing capabilities to lead and enable the genius of private industries’ extraordinary ability to make things happen when the right conditions exist.

That will require reinventing and creating a whole new wave of the use of electricity as the main power source of our whole society, including most transportation, to continue the way of life we all want, as far as hope and imagination can reach, by successfully addressing our energy independence, global warming and foreign source energy problems, all at the same time.. In the spirit of American ingenuity, adventure, exploration we must give this solution a vigorous debate and chance to help break our long standing stalemate in solving this massive national challenge.

A Flexion Point in American History

The US is at a crucial flexion point in selecting its next Democratic Candidate for President.

Eight years of serious blunders in Washington, since Bush edged out Gore in 2000, have left a large majority of Americans desperately hoping for and wanting new Presidential leadership.

A year ago Hillary Clinton looked like she had a 95% chance of being the Democratic candidate for 2008 – despite a lot of her obvious baggage, as she calls it.

A year ago Barack Obama looked like he had about a 5% chance of beating Clinton for the chance of being the Democratic contender, despite his obvious baggage of being unknown with limited experience, etc.

Today, their roles have been reversed and now Obama leads by a small but significant margin in all the metrics. Obama offered up something new, hopeful and exciting, particularly appealing to younger people, as well as people of all stripes all over the country. That enthusiasm produced to date over $240,000,000 from 1.4 million people and a well managed campaign. At the same time, Clinton faced her first real competition from Obama and her baggage weighed heavily on her, as people’s distrust of her grew and she ran low on money having expected to win early and easily.

Now, as the run for the nomination goes into its final innings, the country is faced with wrenching choices, the reasons for which a lot of people find it hard to discuss openly. Few people are willing to admit they may be prejudiced against either a woman or a bi-racial candidate. Though for sure there still are people out there who quietly harbor those kinds of thoughts.

The country is divided between these two candidates along a fairly clear fault line. Younger, forward looking people who don’t care much about racial matters and tend to see Obama as their leader into the future, and older more traditionally oriented people, who lived most of their lives in a racially bifurcated     world, lean towards the hope that Clinton may bring back the golden years of the 90’s under her husband.

At the end of the day (hopefully soon) one or the other of the two has to be the candidate. How, can reasonable people now think about how to come to grips with that choice?

If the choice really boils down to the past versus the future, it might stand to reason that as younger people’s views appear to be preponderant, and since younger people obviously have a greater claim to the future, the scales should be tipped in the direction of the future.

In addition, at some point the country needs to bite the bullet and accept the fact that one of these two candidates, and their many supporters, have to be disappointed and also accept the fact that goes with that reality that inevitably there will be some risks that go with that choice. We also must remember that risks, though different in each case, go with either choice and most probably effectively cancel out in the general election process.

That takes us to the general election and what will inevitably prevail. Since the country desperately wants a new direction and new leadership, the person who best exemplifies the future’s needs will most probably prevail despite today’s subliminal concerns with the unspeakable issues. We know that the Republican candidate, despite his attraction as a war hero and a political maverick, will be hard pressed to be a candidate who can effectively bring the future into focus for our all important younger population.

Thus, the flexion point today is whether the Country will enter into a post racial era and deal with the future in new more bi-partisan forward thinking ways.

Frank Weil is the Chairman of Abacus and Associates, Inc., a private investment firm in New York, NY. He is the former Assistant Secretary of Commerce for the International Trade Administration in the Carter Administration. He is a member of the Council on Foreign Relations.