Regardless of Who Wins
As I write it looks like Obama will get a second term and a second chance to do the right things.
But the reality (as I see it) for this race is the tragicomedy that neither candidate is promising to do anything that would actually work. For one thing, given the political divisions that exist in the legislature it won't really matter much even if they try to do anything. But more cogently, what either candidate claims to want to do is simply not physically feasible. Both say they want to get the economy growing again. They want to increase jobs. Obama, to his political credit, even lays out some specific actions he would like to undertake to implement his desires. Romney only says he has a plan. As far as I know no one has actually found anything in the Romney campaign rhetoric that resembles an actual plan.
Obama has had four years of experience now. He probably has a better idea of what a president can and cannot do. His proposals for economic fixes are pretty tepid, actually, but that is likely because he realizes that anything bolder is simply infeasible. Romney, on the other hand, has no real idea what to expect. Nor does he have advisers that have any real inkling of what a president can do. This is so typical of American election campaigns and despite the fact that most Americans recognize this fallacy, they still act like the election is important. They still cling to an old ideal that probably never was true but still holds appeal. The president is something like a king — the head of state. S/he ought to be able to get things done.
And exactly what does anybody think can be done even if the president were like a king? Liberal economic pundits like Paul Krugman and Robert Reich are demanding Keynesian heroics claiming it worked once before so it should work again. I understand their sentiments. They care deeply that there are people hurting by not having jobs and the income distributions have become unfairly slanted to the wealthy. They are liberals after all. But we should not confuse their desires with intellectual prowess. Believing that, “all other things being equal”, what worked before should work again is not the same as a careful, intelligent analysis of the whole systemic situation now that would reveal just how all things are not equal. We are in an entirely new physical regimen when it comes to the fuel for economies.
Conservatives still push on the same tired agendas, lower taxes and regulations and reduce the deficit by decreasing the size (and functions) of government. They conveniently forget that it was a few of their champions (like Ronald Reagan) that did pretty much the opposite when they had the chance. Republicans (the kind running the party today) never let facts get in the way of a good ideological story.
The liberals cling to the notion that a growing economy will benefit all as long as government sees to it that tax laws are fair and regulations of commerce and over the environment are handled properly. So they cling to growth as a fix all. Conservatives, likewise, hold the same position with respect to the goodness of growth, but only since a growing economy will reward those stalwarts who risked their capital to produce that wealth more than the interchangeable part of the economic machine we call workers.
This is a true tragicomedy. The foibles of either party will result in efforts to go against the laws of nature, wasting who knows what little wealth we might still have. Either one will make us all hugely poorer even while they are trying to make us (or some of us) richer. You have to laugh at their bungling but you have to cry at the outcomes.
What we might do is compare possible scenarios for each of the candidates regarding what they would actually try to do. A lot depends on the ideological mix in the House and the Senate, of course.
If Romney Wins
Romney's position has been that if government gets out of the way of business then the businesses will invest and start growing, thus hiring more workers. So he would presumably try to reduce taxes on business and reduce regulations that burden business. Suppose for a moment that the Senate swings to the Republican side, and, in fact, gets a large enough majority to bust a filibuster move by the Democrats to block any Romney-sponsored legislation (tit-for-tat guys). Would moves to reduce taxes and regulations while simultaneously decreasing the deficit (and debt) actually work?
Lets consider the idea that by improving (in his mind) the climate for business that those businesses would invest in new plant and equipment (or offices in the US) and start hiring people. Where will the businesses get the capital to invest. Currently the meme floating around is that businesses are sitting on heaps of cash because they are uncertain where things are going. They are not using that cash to invest but if government gets off their backs they will do so. For this we need to ask ourselves if this is really true. Are businesses sitting on cash because of government-generated uncertainty? While there is evidence that this idea holds some merit for small businesses, particularly with respect to the complexities of tax code (not the tax rates per se) the majority of uncertainty in the minds of business managers is with regard to not understanding where their customers are going to come from and, for that matter, where the kind of skilled workers they need will come from. You don't build product on hopes that there will be customers with money to spend and you don't invest in automation unless you know you have the kinds of skilled workers to run it and maintain it (see: http://www.businessnewsdaily.com/3038-small-business-capital.html). There is a great deal of uncertainty about the future of sales because the global economy is in the dumps. China, the great hope for growth, is slowing down (and may actually be slower than they self-report). And as I have argued consistently the global downturn is due to declining net energy available for economic activity. This decline is seen in the increasing costs in fossil fuels, especially oil. Since oil is the basis for the vast majority of our transportation systems the increased costs will show up in inflation in all sorts of goods and services. Those costs will propagate throughout the economy and are seen especially easily in food and transportation fuel costs.
Romney's thesis is flawed. He doesn't really understand that it isn't government per se that is in the way of business, it is costs to do business that is the problem. And those costs have been consistently rising. Back in the day it was possible in the short run to compensate for inflation by borrowing short-term capital and rolling the interest forward. Companies did this under the belief that they could eventually catch up and pay back the debt with excess profits in the future. The problem is, and we are all starting to grasp this, is that the future they imagined never came. Today they are reticent to borrow and banks have become reticent to loan because the real uncertainty is in the likelihood that some grand day when we resume producing vast amounts of real (not financial instrument) wealth will come is the only thing growing.
But, if Romney wins and was able to get some of his proposals through (he could by fiat reduce the effectiveness of the EPA, for example) would that do more harm than good? In my opinion the rate at which things are going downhill would probably overcome the economic system before he or Congress could actually get anything through. In fact I can easily imagine that by the end of a Romney administration's first term there will be massive revolts and mayhem from people fed up with any form of government. He would be either voted out or find himself in a worst case scenario having to declare martial law. Physically determined events, not a Romney presidency will determine just how bad things might get.
If Obama Wins
I really think Obama believes the economists and bankers who convinced him to hire Geithner and Summers, et al. He buys into neoclassical economics and probably does believe the Keynesian's version. Therefore he may try to implement some kind of stimulus beyond the quantitative easing the Fed has put in place. Rather than print money (that is the Fed's job now) he will try to take the country deeper into debt to invest in infrastructure repair. He'll want to repair the roads and bridges used by transportation vehicles that will eventually be parked permanently for the cost of fuels. What a waste.
He will probably try to do something about wage disparities. He may try to increase the taxes on the rich and reduce them on the middle class and poor. Good luck with that. He may try to invest more in alternative energies and clean coal. But that is because he hasn't, apparently, ever taken a physics class and his main science and energy advisers are too chicken or too self-possessed to explain to him what the real problem is.
He just might have the courage to speak to the American public about the kinds of sacrifices they will have to make (as he alluded to in his inaugural address less than four years ago). But his notion of sacrifices is modeled on those made by American citizens during WWII. Yes Americans were will to sacrifice their creature comforts in support of the war. But they also assumed the war would one day end and they would get back to business at home. They had just come off of a Great Depression so the acceptance of some sacrifice probably wasn't foreign to their minds. Modern day Americans are incredibly spoiled. But even if they were to accept that message it would be in the same vein as accepting sacrifices during the war — they would be temporary inconveniences while we built back our massive economic engine and revved it up. One day, all will believe, we'll get back on track consuming the s**t out of stuff and living merrily ever after. Our kids will have a better life than did we.
But, of course, it is merely a sad hope. There are fundamental physical reasons why humanity is now in permanent contraction. That will go not only for economic activity (the kind that actually produces assets of use) but for the population itself. Modern food production and health care require substantial levels of energy flow, which, until very recently, was coming in increasing amounts from fossil fuel extraction. That is no longer the case. Food prices and medical costs will continue to rise until the average person can simply no longer afford them. Already the movement toward home gardening is showing a sensitivity to the trend. Unfortunately it is nearly impossible for the average suburban (and definitely the urban) home to produce enough food for year-round consumption, let alone supplying all needed nutrition during just the summer-fall months.
I now see Obama as an empty suit. He is a smart rhetorician but he is ignorant, perhaps as much as Romney is, of basic physical laws and the facts that tell us where things are really going. I'm not even sure he is particularly intellectual and a critical thinker. You would think that after so many failed attempts to buoy the economy by financial manipulations he would be asking fundamental questions. Instead he claims that it would have been so much worse if his programs (bailing out the auto industry and banks, for example) hadn't been implemented. Of course he has absolutely no way to verify such a claim, but hey, this is about getting reelected not scientific verification of hypotheses.
The fact of the matter is that all a president can or should do at this point is to tell the truth about our physical reality. He (or, if ever she) has a moral duty to inform the citizenry as to their actual options. Right now, however, we seem to have two candidates for the office who either do not know the truth or are willing to pose the big lie just so they can get elected. Not knowing the truth means that person is ignorant. We are talking about real science, but it isn't rocket science. Understanding the simple relationship between net energy and economic activity (and growth) does not require a PhD in physics. But it does require dropping ideological biases that blind one to the reality.
As I look at either candidate's positions on the economy and energy it seems clear enough that Romney is completely and profoundly ignorant. It is an ignorance imposed on him by his ideology (or more likely his adopted ideology of the right wing, as I suspect he is a hollow man). He is ignorant both of the problems that come from unbridled economic growth and the role of energy in providing economic activity. He and his ilk live in la-la land. Obama, on the other hand has access to a greater amount of factual information about net energy and its relation to the economy, though he is ignorant of the reality of alternative energy as a scalable source of power. Where he is more deeply ignorant, apparently, is his persistent belief that a growth economy is the only viable way for humans to live in the world.
The two also differ in their notions of how economic wealth should be distributed among the citizens. This may be the most important difference as the economic pie continues to shrink in the future. As the shrinkage began in the early 70s we began to see an earnest application of old principles of rewards going to the already wealthy and the burden of declining total wealth going to those already low in the economic strata. As the total wealth declined, the pressure for those in power to open more pathways for the already rich to get richer increased resulting in abandoning many forms of commerce and financial regulations as well as turning to off-shoring jobs to lower priced labor markets to protect profits. Today we have a global house of cards in which the money supply is no longer representing the real physical wealth it ought to be able to purchase. It is just created out of thin air to make it seem that things are almost OK. They are not OK in any sense, but the average person doesn't understand this. Apparently, however, neither does the average candidate for president.
By not telling the people of the world the truth about the end of growth and the onset of decline, and explaining to them why this is happening, the leaders of the governments of the world are essentially saying that people do not have the right to know. They do not have the right to consider how they should plan their own futures in light of decline. The big problem with this position is that there will be a point in time when the truth of decline becomes clear to all even though they will not know why (i.e., that it is everyone's fault for demanding a consumer lifestyle, so no one group or person should be blamed solely) and they will react very badly. The damage from not telling the whole story as soon as possible will be far worse, I think, then continuing to pretend (or believe) that things will get better one day and we can all be happy again. Those who are now maintaining the façade will quickly be seen as the perpetrators and the masses, to the extent they have the energy to do so, will turn on them mercilessly. And since those who are in the so-called 1% category have only wealth on paper, and since that paper will become worthless in the blink of an eye, they will not be able to hire armies to protect them. They will discover that their smoke and mirror tricks for creating that supposed wealth will backfire on them.
Everyone in the world will be increasingly poor as the years go by. The rate of decline is still in debate, but there are really no more deeply thoughtful people who don't understand that we are in decline. There are many bright people who remain hopeful, and even optimistic. But I think they are driven by personality traits rather than intellectual reasoning to maintain that position (though some are extremely good at using their intellects to rationalize their optimism!). Over the past five years I have seen one after another hopeful optimist realize that all of their optimism hinged on the notion that somehow the leaders would see the truth and we would all get on board with programs to save society. But the rates of decline are catching up. Weather anomalies from global warming/climate change becoming the norm and economic decay spreading and accelerating are overwhelming that optimism.
No leader of any country or under any kind of governance philosophy can do anything to change physical reality. So long as net energy is trending downward economic activity will follow. Nothing short of a technological miracle could alter this. And that would require a scientific breakthrough of an incredibly serendipitous kind; one that could be followed by rapid exploitation and adoption. And it would pretty much have to ‘fund’ itself. That is it would have to bootstrap up to scale in a very short period of time (decades), Contrast that with the situation with, say, solar energy, which requires an existing fossil fuel energy infrastructure to underwrite its manufacture, distribution, and maintenance. No. The leaders of nations today are powerless to do anything that will make it better. The only thing they can do, honestly, is tell people the truth. And what are the odds of that happening?
 Natural gas price is currently depressed due to a glut owing to the well performance of non-conventional (fracked) wells in shale formations. It is now becoming clear that while these wells tend to produce an initially higher production rate than conventional wells, that the nature of the shale gas is such that production falls off more rapidly and the total production per more expensive well drilled is lower. That is, these wells have a significantly lower EROI and in addition, not all wells are going to perform all that well. This means we are likely to see a rapid decline in gas stocks as there will be fewer and fewer wells performing at economic flows.