Connecting the Dots

Enjoying a typical East Coast humid August morning, I noticed three disparate stories in the news today.

• The price of gasoline in nearly every section of the U.S. is on the rise
  

• The Dow Jones Industrial Average, which is the best leading economic indicator we have, fell by more than 186 points Monday
  

• The Wall Street Journal reports this morning that the Obama administration is lending Brazil $2 billion for new oil and gas exploration off its coast
  

Although these stories are unrelated, they are connected. The Dow lost about 2% of its value yesterday on a realization by Wall Street that, unlike in the past, consumers will probably not be able to spend the nation out of this recession. Consumers remain edgy about spending because of the uncertainty coming from Washington. How to pay for a deficit projected at $17 trillion by 2019, the ultimate shape and cost of healthcare "reform," and an unemployment rate that continues to rise, although more slowly, are all weighing on consumers minds as they make spending choices.

Part of that consumer uncertainty and pessimism is the cost of gasoline. Gasoline is a recurring expense. Every time you fill up you're reminded that prices continue to rise all over. This makes consumers wary of spending. For a consumer-driven economy, that's deadly. Our economy booms when consumers are optimistic, buying everything from durable goods to fishing tackle. When consumers pull back, there are fewer jobs that involve manufacturing, distributing and selling consumer goods. That means less tax revenue and even bigger deficits, which have to be filled by--you guessed it--higher taxes. And the spiral goes downward from there.

Which brings us to Brazil. Now, it might sound odd that a government which is on the verge of having to hold a telethon to raise money to pay its bills is lending a third world country cash to drill for oil off of its coast. Especially when that country has thousand of miles of coastline of its own that hold oil and gas deposits that could greatly lessen our energy dependence on countries like Brazil, Venezuela and the Arab states. In 2007 Enviro-kooks went to court to stop planned oil and gas exploration in Alaska. The Court has said that the ruling just applied to Alaska waters, not the remainder of the Pacific Coast. But the Obama Administration continues to slow walk plans for offshore exploration, in deference to its environmental masters. Meanwhile, we continue to inch back up to $3.00 a gallon.

So if we connect the dots this morning we have consumers voting with their pocketbooks on the economic recovery and the result isn't good. Consumers still don't believe the economic babble coming from Washington about prosperity being just around the corner. One reason is that the volatility of gasoline prices continues to remind us all how fragile our family finances are. And with a chance to encourage optimism, this Administration continues to demonstrate how tone deaf it is to how the American people really feel. Pres. Obama continues to pay homage to the environmental lobby and refuses to do something simple but concrete that will encourage optimism, get people spending again, and achieve real energy independence. 

Just thought you might like to know.