By Peter Forman
Published: September 22, 2008
New York—Benjamin Franklin once wrote, "a penny saved is a penny earned.” Today he might have written, "a dollar spent at home is many dollars earned."
Dollars spent on gas and oil (petro-dollars) sent to cash-rich Saudi, Russian, and Venezuelan regimes do not get strongly "recycled" into the American economy and create downward pressure on the US dollar.
Owners of US dollars have two choices. They can use their US dollars to purchase goods and services or they can use the dollars to purchase assets or debt, like companies or Treasury bonds, respectively. According to the Federal Reserve Bank of New York in 2006, out of each exported petro-dollar in recent years, only 20 cents gets recycled back through the US economy as the purchase of good and services.[i] The balance is for assets and debt.
If America were to develop new, domestically generated sources of energy to power vehicles, such as solar, wind, and other renewables, these dollars would recycle many times within the US economy in the form of goods and services as they pass from employer to employee to food vendor to landlord, etc.
As an example, let's say that 80% of a typical dollar spent is used to purchase items that are principally domestically supplied. Then of that $0.80, if it were spent similarly, 80% of it, which is $0.64 would then get spent domestically. This would continue many times, creating jobs and profits along the way.
Now, we are not suggesting that we should purchase domestically JUST for this recycling benefit.
The reality is that the world is best off if each country produces what it can produce best and cheapest and if all trade freely. We are not advocates of protectionism.
Petroleum, though, has hidden subsidies and costs that further distort the impact of this foreign trade. By recognizing the hidden costs of petroleum (as discussed in this news analysis) and then creating a market and level playing field for all energies, we will naturally, without OPEC-like market distortions, create more domestic jobs and economic benefits.
This competitive landscape would likely bring down the cost of transportation energy for all.
As for the jobs, it has been estimated by the University of Tennessee and the University of California that as many as 5 million jobs could be created if only 25% of America's transportation energy requirements were produced here.[ii] [iii] If America were to source the 60% of oil currently imported domestically, it could mean as many as 10 million additional jobs.
And then there is, of course, the derivative benefit from the recycling of those dollars as they continue to spread throughout the economy with all the ancillary wealth and jobs they would create. And the avoiding of the pitfalls related to the mass exporting of dollars--the economic and potential national security risks created by foreign ownership of so much of our Corporate assets and Federal debt.
A free-market of energy that replaces subsidized and hidden-cost imported oil with domestically sourced energy can make us nationally secure, economically strong, and cleaner and greener.
It is time to create many millions of American jobs.
It is time to become Economic Recyclers; it is time to move beyond oil.
References ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
[i]
Federal Reserve Bank of New York
[ii] 25% Renewable Energy for the United States by 2025
[iii] Economic Assessment for Climate Action in California
MoveBeyondOil.org
The bi-partisan, not-for-profit source for energy independence information and solutions.
