For all its soaring rhetoric, President Obama’s “jobs speech” last week didn’t demonstrate a lick of insight into why economies grow or how wealth is created.
by Mary A. O’grady
It was merely trademark Obamanomics: using government diktat to move money that’s over here, over there.
Having spent an hour the day before with Ron Liepert, the energy minister from the Canadian province of Alberta, I found it especially disturbing to hear nothing in the speech about reversing the administration’s anti-fossil-fuels agenda. Canada has recovered all the jobs it lost in the 2009 recession, and Alberta’s oil sands are no small part of that. The province is on track to become the world’s second-largest oil producer, after Saudi Arabia, within 10 years. Meanwhile Mr. Obama clings to his subsidies for solar panels and his religious faith in green jobs.
U.S. unemployment is high because capital is on strike. Short-term offers to coax investors into taking new risks aren’t going to cut it when they have been forewarned that the president intends to pay for it all by raising taxes in the out years. The market dropped over 300 points the day after Mr. Obama’s speech.
On the regulatory front the picture is even gloomier. Much of America’s vast untapped energy potential lies dormant because Mr. Obama’s regulatory watchdogs have spent the past three years throwing sand in the gears of the permitting process for exploration and exploitation on federal lands. Separately, TransCanada has been trying since September 2008 to get a permit to build the Keystone XL pipeline from Alberta to the Gulf Coast. The Environmental Protection Agency has so far blocked it.
A glimpse of what all this has cost the U.S. economy can be seen by looking north to Canada, where animal spirits have been unleashed in the energy sector. Canada’s close economic ties to the U.S. have traditionally meant that when the U.S. gets the sniffles, Canada gets swine flu. This time it’s been different. Part of the reason is that Canada’s housing market was not poisoned by a federal government push to put unqualified borrowers into homes they could not afford. After the 2008 collapse of the housing bubble in the U.S., the Canadian financial sector remained strong.
That alone was not enough to protect Canada from the effects of the U.S. recession. The manufacturing sector was hit hard, and in the first quarter of 2009 the economy contracted by an annualized 7.9%.
Yet Canada has outperformed the U.S. since then. In 2010, according to the International Monetary Fund, Canada grew at 3.2% versus 2.9% in the U.S. In 2011, the IMF estimates Canada will grow at 2.9%; unemployment is now 7.3%. The IMF’s U.S. growth forecast is 2.5% this year, and U.S. unemployment is 9.1%.
One explanation for Canada’s more robust growth is its strong commitment to energy, which has become more valuable in U.S. dollar terms under Federal Reserve Chairman Ben Bernanke’s inflationary policies. Alberta is now producing two million barrels per day but expects that number will grow to four to five million within a decade.
Alberta’s oil and gas industry supports more than 271,000 direct jobs and hundreds of thousands of indirect jobs in sectors such as construction, manufacturing and financial services. The province has an unemployment rate of 5.6%. There are also some 960 American companies involved in Alberta energy, supplying equipment and technology, among other things. As an example, Mr. Liepert says, “dozens of Caterpillar tractors, made in Illinois and Michigan and costing $5 million a piece” work the oil sands. He says the region is on track to create more than 400,000 direct American jobs by 2035. The Bakken region of North Dakota, where private land ownership gives drillers relief from federal obstructionism, shares a similar, if smaller, story. Oil production there is booming, and North Dakota unemployment is 3.3%.
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TransCanada’s Keystone XL pipeline, if the U.S. ever issues the permit, will mean $20 billion in investment. The company says the construction phase will require 13,000 direct hires and indirect new jobs could total 118,000 in the U.S.
But Keystone XL is only a fraction of the potential that could be released if Mr. Obama changed his energy policy. In a study commissioned by the American Petroleum Institute and released last week, the energy consultancy Wood MacKenzie estimates that pro-development policies could, by 2030, “support an additional 1.4 million jobs, and raise over $800 billion of cumulative additional government revenue.”
On the other hand, according to the study, current policies “which slow down the issuance of leases and drilling permits, increase the cost of hydraulic fracturing through duplicative water or air quality regulations, or delay the construction of oil sands export pipelines such as Keystone XL, will likely have a detrimental effect on production, jobs, and government revenues.”
A serious jobs proposal would address these issues. Mr. Obama doesn’t have one.
Write to O’Grady@wsj.com
Image: Associated Press