Someone has said that you need to look back in order to know where you want to go. You might want to pour yourself a stiff drink before trying to digest the trends and events that characterized this year and show every promise of dominating 2008.
The year began with weather that encouraged some to get out a T-shirt for a week in January ”“ a delight to some, a cause for anxiety in others. Tornadoes touched down in Westchester at least three times this year and a severe flood gave residents of Rye and Mamaroneck a hint as to what it was like in New Orleans. All of these events are weather anomalies in this region. Coincidentally, this was the year global warming moved past Al Gore, who won the Nobel Prize for his work on it this year, and into the public consciousness. Task forces have now been set up to look at the implications. The efforts so far appear to be directed to finding less harmful means of maintaining our lifestyle ”“alternative fuels, efficient light bulbs, etc. ”“ while attempting to reduce the carbon footprint.
The stock market had a glorious year, soaring into unheard-of heights with hardly a blip when disturbing news hit the papers. The cost of housing continued its climb, encouraging the wealth effect, until something burst the bubble. Homeowners caught in the subprime web, wanting more than they could afford, and mortgage firms enjoying the return on their new creative financing schemes, have caused a negative impact on the economy that will go well into 2008, if not 2009.
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A power struggle
Here”™s how the energy picture unfolded this year. On Feb. 2, a barrel of oil cost $50. Through the year it went on a jagged climb finally reaching $98 around mid-November before dropping back to $88, only to start back up again. That”™s pretty close to a 100 percent increase, friends. Is anybody paying attention? When such a fundamental part of the U.S. economy is able to rise this fast a hefty jolt to our lifestyle has to be in the near future.
T. Boone Pickens, a Texas oilman of Texas-size repute, summarized the status of world oil when he said, “We”™ve got 85 million barrels of (global) supply and 88 million barrels of demand.” In spite of encouragements from consumer nations to pump more oil the OPEC countries have recently decided not to comply. World oil production has been on a plateau for the last two years while world demand continues to grow.
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Meanwhile, the U.S. government dabbles in energy-reduction strategies that won”™t kick in for years, well past the time when a severe energy crunch could manifest. (Check out the current energy bill trying to get out of Congress). An interview with Sadad al-Husseini, who retired from Aramco three years ago, where he served as the top executive for exploration and production, is revealing. Two years ago, in an interview with Peter Maas for the New York Times, Husseini said, in response to efforts to pressure the Saudis to pump more, “It is not our problem to tell a democratically elected government that you have to do something about your runaway consumers. If your government cannot do the job, you can”™t expect other governments to do it for them.”
Two-and-a-half years later we are still hoping the oil-producers will bale us out.
It is clear there is not a lot of room in the current federal budget to absorb anything like the major energy crunch just over the horizon, particularly with the military budget soaking up such a hefty chunk.
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A taxing issue
To understand the scale of our current financial status, to pay off the national debt every man, woman and child would be required to kick in $30,000 a piece as of today. However, every 24 hours another $1 million is added to that debt, definitely not a sustainable financial pattern for the nation. Curiously, it has been the Democratic administrations that have managed to keep debt and the size of the government in check, its reputation for tax and spend notwithstanding. Maybe we can hope for more sanity in our financial house in the next administration.
That inevitably brings up the matter of taxes. That”™s right ”“ taxes ”“ the dirty word! Money collected from the graduated income-tax system has been the traditional way we used to run the government. Eagerness to cut personal income-tax rates in the last 25 years, however, has dramatically altered that system. Now we just borrow what we need. As the federal government spends our tax dollars at an inexorably rising rate in global adventures, there is little left for the states”™ needs, such as crumbling infrastructure. This increases debt levels at the state level and puts more responsibility on counties and local municipalities which, in turn, are required to balance their budgets, the so-called unfunded mandates. They have two options to raise money ”“ sales and property taxes (besides long-term bonds). Neither of these solutions rain down fairly on members of the public. Westchester now has the highest property taxes in the nation just at a time when the percentage of elderly is on the rise. Reliance on the sales tax to raise revenue has now shown its weakness. As the economy slows sales tax revenues do the same. What a surprise! We need to be reminded that 70 percent of the economy is fueled by consumer spending. Talk about a house built on sand. This is the 2007 tax picture ”“ something of a twisted mess – in the midst of an array of trends that will add to uncertainty in 2008. Happy New Year.
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Surviving the Future explores a wide range of subjects to assist businesses in adapting to a new energy age. Maureen Morgan, a transit advocate, is on the board of Federated Conservationists of Westchester. Reach her at mmmorgan10@optonline.net.
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