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Spending DA Aff.............................................................................................................................1 Non-Unique.................................................................................................................................................................2

Non-Unique.....................................................................................................................................2 Non-Unique – A2: GDP..............................................................................................................................................3

Non-Unique – A2: GDP.................................................................................................................3 Non-Unique – Consumer Confidence.........................................................................................................................4

Non-Unique – Consumer Confidence...........................................................................................4 No Link – President....................................................................................................................................................5

No Link – President.......................................................................................................................5 Link Turn (Competitiveness)......................................................................................................................................6

Link Turn (Competitiveness)........................................................................................................6 Link Turn (Oil)............................................................................................................................................................7

Link Turn (Oil)...............................................................................................................................7 Link Turn (Oil) 1/2......................................................................................................................................................8

Link Turn (Oil) 1/2.........................................................................................................................8 Link Turn (Oil) 2/2......................................................................................................................................................9

Link Turn (Oil) 2/2.........................................................................................................................9 Link Turn (Ethanol)..................................................................................................................................................10

Link Turn (Ethanol).....................................................................................................................10 No Impact – Resilience.............................................................................................................................................11

No Impact – Resilience.................................................................................................................11 No Impact – Resilience.............................................................................................................................................12

No Impact – Resilience................................................................................................................12 No Impact – China....................................................................................................................................................13

No Impact – China.......................................................................................................................13 No Impact – Competitiveness...................................................................................................................................14

No Impact – Competitiveness.....................................................................................................14 No Impact – Competitiveness...................................................................................................................................15

No Impact – Competitiveness.....................................................................................................15

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Non-Unique Recession is inevitable – credit crisis, auto industry, consumer confidence, employment Joseph Brusuelas, Chief Economist, Merk Investments, July 11, 2008, An Economy in Trouble Over the past few weeks many notable analysts have made the case that the economy is in the process of recovery. The market has celebrated the wonder of the “resilient consumer.” Given the still fragile state of the economy we think that this is a bit overblown. A cold-eyed, hard-nosed analysis of the true condition of all things financial provides us with a very different assessment of the economy. But, with a major week of fundamental data and the onset of earnings season for financials upon us we thought it pertinent to put a few ideas to rest. First, the credit crisis has yet to run its course. A genuine credit crisis is comprised of two components: a liquidity crisis and insolvency crises. With already $400.00 billion in global write offs within the financial sector alone one might be tempted to declare the credit crises over. Yet, the problems on the balance sheets of financials will continue. Write-downs and the process of de-leveraging have yet to be finalized. We believe that there are $75-$100 billion in write downs left in the US alone before we reach a conclusion to the liquidity portion of the crises. This will continue to depress whatever appetite for risk taking in equity and credit markets remains. The Fed did not extend its primary dealer credit facility well into 2009 by accident. Moreover, we have only begun to embark on the insolvency portion of the economic tragedy unfolding before our eyes. Too many market players are operating on the unspoken assumption that the fall of Bear Stearns and the near miss at Lehman have signaled that the end of the troubles are at hand. Unfortunately, this is not the case. The crisis that has primarily engulfed Wall Street is beginning to spillover onto Main Street. Ford and GM will both be candidates for mergers, bankruptcies or bailouts in 2009. It is quite clear to anyone that care to look that Fannie Mae and Freddie Mac will have to be bailed out by the Federal Government. Pending legislation in Congress regarding the end of private fee for service, if it is enacted, will put at least one major player in the healthcare sector and one minor actor at serious risk of insolvency early next year. And do not forget the 200-250 small and regional banks that the Fed has warned us will eventually fail. Even such stalwarts as the gaming sector, which has been traditionally impervious to systemic economic slowdowns is going to see a spree of consolidations and perhaps a few insolvencies on the back of too much debt and a sharp reduction in demand from consumers who have seen their discretionary income evaporate. Second, the consumer is no longer resilient but in fairly significant trouble. A well -timed and quickly implemented fiscal stimulus program is masking the true condition of the consumer. Pre-fiscal stimulus, the trend in real personal consumption was absolutely flat. Once the positive aspects of the stimulus withers away the prevailing trend in real consumption will reassert itself and we shall be back to where we were in the first quarter of the year. The market has observed six consecutive months of contraction in non-farm payrolls. Growth in the once vibrant service sector has collapsed to near zero growth over the past three months. The major factors keeping the labor sector from collapsing appears to be the very questionable birth-death model at the Bureau of Labor Statistics and the aforementioned healthcare and hospitality sectors. Over the next few months the modeling at the BLS will catch up with reality and the healthcare/leisure sector will experience outsized contraction based on current economic conditions and trends. The decline in real

income will put additional pressure on an already stressed consumer and set the stage for the final capitulation. Finally, we will see a series of revisions to recent economic data, including GDP that may change current perceptions of the economy. We expect that the downward revisions will confirm that we are in a mild recession. More importantly, we anticipate that when we get to the final quarter of 2008 will see another downturn in economic activity. Since 2007 my forecast for the economy has been “W” (no pun intended) shaped recession. We saw the first trough in late February and early March of 2008. We are currently at the middle apex of the “W” and expect to see growth begin to decline during the early portion of Q4’08. The final trough in our double dip scenario should occur in the second quarter of next year. The sub trend 2.1% rate of growth that we expect to see in Q2’08 is a function of Washington priming the pump and the a vibrant external sector. Once the stimulus from the Federal government begins to fade and the impact of the searing increase in the cost of energy and commodities can be assessed on a domestic and global basis, the last vestige of support for the economy, net exports will fade to away and the US economy will see its first major recession since the early 1980’s.

Recession is either inevitable or impossible CNN interview with Fareed Zakaria, world affairs analyst, July 11, 2008, Zakaria: Perfect storm hitting U.S. economy NEW YORK (CNN) -- Between the mortgage crisis, record high oil prices and a lackluster stock market, Americans are not exactly confident about the economy. CNN spoke with world affairs analyst and author Fareed Zakaria about his view of the situation. CNN: How bad is the U.S. economy right now? Zakaria: It almost looks like a perfect storm. We have a collapsing housing market, weak consumer spending and a credit crisis that has kept banks reluctant to extend credit easily. Plus, food and fuel prices are soaring. It's actually a sign of the strength of the American and global economy that we're not in a big global recession given all of this. But it's not going to get better fast. CNN: So, we're not past the worst yet? Zakaria: Look I'm not a trained economist but I had three of the best on the show this week -- Larry Summers (Treasury Secretary for Bill Clinton) Jeff Sachs (Director of UN Millennium Project), and Paul Krugman (op-ed columnist on economy for The New York Times). And they all agreed that it was unlikely that we had worked through most of the problems in the economy. They felt we seemed to have avoided the worst of the financial crisis but that now the real economy was beginning to show the signs of pain -- housing was going to

keep declining, the consumer would scale back and companies would cut their workforces.

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Non-Unique – A2: GDP Recession is inevitable – the best data proves that GDP growth will collapse Caroline Baum, Bloomberg News Columnist, July 13, 2008, APP.com, Caroline Baum: Its all over but the dating for U.S. recession With no prospect for a near-term turnaround in the labor market, the real question becomes, at what point do the employment declines gain the critical mass to warrant the official recession designation? "Depth level" I posed the question to Robert Hall, chairman of the BCDC, in an e-mail this week. After emphasizing that he was "speaking as an individual member of the committee and not as chair," he said the committee "may reach the question of what depth level constitutes a recession, but we are not there yet." The committee may not be there yet, but the economy most likely is. All four of the BCDC's coincident indicators peaked late last year or early this year. The trends in the components aren't likely to reverse anytime soon. So as Hall said, it's only a matter of determining what "depth level" will suffice to make the recession official. What about real gross domestic product, which is still growing? The BCDC uses four monthly indicators because they are a) more timely than quarterly GDP and b) a proxy for it. Real GDP rose 0.6 percent in the fourth quarter and 1 percent in the first. The meager fourth-quarter increase could turn to mush as early as July 31, when the Bureau of Economic Analysis releases its annual benchmark revisions to the National Income and Product Accounts for the last three years. A decline in GDP in the fourth quarter wouldn't be the depth charge the BCDC needs to designate an official cycle peak. That comes with a long lag, sometimes after the recession has ended. It would just be a confirmation for those of us who, to paraphrase economist Robert Solow, see a recession everywhere except in the GDP data.

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Non-Unique – Consumer Confidence Consumer confidence going from bad to worse – prefer predictive evidence Peter Charalambous, Investment Markets UK, July 14, 2008, US consumer sentiment at a 28-year low, http://www.investmentmarkets.co.uk/20080714-2260.html

US consumer confidence is at the lowest level in 28 years as spending has slowed in a period where credit availability and the affects of the federal tax rebates are reducing. Consumers are still concerned about rising energy and food prices as well as job layoffs and the future of the economy still remains bleak. The pessimism in the economy has continued to threaten consumer spending and the domestic market, which is the largest part of the US economy. With record high petrol prices and the labour market weakened by continued cutbacks, as well as a troubled housing market, inflation is now teetering at 3.4 percent. Future consumer confidence is likely to continue to be weak as consumers polled by Reuters/University of Michigan said they expect an inflation rate of 5.3 percent over the next 12 months, which is a 0.2 percent increase from the previous month.

Consumer confidence will continue to fall Bloomberg News, July 11, 2008, U.S. consumers still skeptical about economy Confidence among Americans remained close to the lowest level since 1980 this month, threatening to cut consumer spending and send the economy into a deeper slump. The Reuters/University of Michigan preliminary index of consumer sentiment registered 56.6, higher than forecast and little changed from a June reading of 56.4 that was the lowest since May 1980. Government reports showed the U.S. trade deficit unexpectedly narrowed in May and prices of imported goods rose more than forecast in June. The confidence reading lends support to forecasts that consumer spending and the U.S. economic expansion will slow after the impact of federal tax rebates fades. Consumer spending will increase just 0.2 percent next quarter, the smallest gain since 1991, according to a Bloomberg News survey of economists completed this week. "The fundamental pressures are still building on the consumer," Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis, said in an interview with Bloomberg Television. "We expect much weaker spending and confidence as we move into the fourth quarter of this year."

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No Link – President Presidential policy-decisions don’t effect the economy Daniel Gross, Moneybox columnist for Slate and the business columnist for Newsweek, July 13, 2008, Neither Obama nor McCain can cure ailing economy Does the president really have any effect on the short-term direction and performance of the economy? The answer is no, but with two important "buts." Over the past 219 years, the U.S. economy has expanded under all types of presidents, Democratic and Republican, activist and somnolent. But there have certainly been notable policies that inflicted short-term damage, such as Thomas Jefferson's ill-conceived embargo on trade with Britain in 1807 and Ulysses S. Grant's decision to place the United States back on the gold standard, which contributed to a banking panic that in turn led to a recession that lasted for nearly all of Grant's second term. Between 1929 and 1933, as a stock-market crash and credit crunch metastasized into the Depression, Herbert Hoover adopted a hands-off approach that exiled his party from the White House for a generation. But today, while the president of the United States may be the most powerful person in the world, "his influence on the short-term macro-economy is generally overestimated by voters," says Thomas E. Mann, senior fellow at the Brookings Institution. Partisans might think the economy got off the mat the minute Ronald Reagan was inaugurated in 1981 or when Bill Clinton took the oath in January 1993. But the factors that influence the business cycle are so myriad, powerful and unpredictable that not even an executive as muscular as California Gov. Arnold Schwarzenegger could bend them to his will. The megatrends that made the 1990s a long summer of economic love – the end of the cold war, the deflationary influence of an emerging China, the Internet – would have happened with or without Rubinomics. And most of the factors now making life miserable – commodity inflation, a housing bubble and a weak dollar engineered by the Federal Reserve's promiscuous policies, the demand-driven surge in oil – would likely have materialized had John Kerry won in 2004. The maturation of the Federal Reserve into a powerful, independent agency has further stolen the thunder from the presidency in short-term economic affairs. By cutting interest rates and offering banks access to liquidity, Federal Reserve Chairman Ben Bernanke has done more to stimulate the economy in the past year than Mr. Bush or Congress. There's a third reason the identity of the next president won't matter all that much to the economy in 2009. The past 16 years of experience – not to mention this year's campaign platforms – prove that Democrats and Republicans diverge sharply on fiscal and economic policy. But on some of the big-picture items that matter most to short-term performance, a consensus has emerged over the years. Modern Republicans have learned their lesson from Hoover and have embraced the necessity for short-term fiscal stimulus when the economy slows. "We're all Keynesians now," as Richard Nixon said. Modern Democrats have also learned their lesson from Hoover, who signed the disastrous Smoot-Hawley Tariff into effect in 1930. Twenty-first-century Democrats generally embrace the utility of free trade, even during economic downturns. This isn't to say that the identity of the president in 2009 won't matter. Presidents tend to have the most success enacting new policies in the first year in office. And the next president will appoint a Federal Reserve chairman early in his term. But – and this is the first but – the macroeconomic impacts of early-term policies are often evident only after several years. Harvard economist Benjamin Friedman notes that Nixon's imposition of wage and price controls in August 1971 helped smooth his re-election in 1972. "But these controls became a substitute for serious anti-inflationary policy, and were the beginning of a set of policies that led to really severe inflation." So here's some straight talk about change we can believe in. Most of the promises that Mr. Obama and Mr. McCain are making about the economy will founder on the shoals of a Congress unwilling to be a rubber stamp, organized industry opposition, unanticipated events, budget realities and changes in the macroeconomic climate.

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Link Turn (Competitiveness) Competitiveness is shot unless the US develops alternative energy Lloyd V. Stover, Environmental Scienctist, July 12, 2008, A New Kind of Recession, Waldo County Opinions We are witnessing a dramatic shift in world influence. The energy-producing nations — the Middle East, Nigeria, Russia and Venezuela, may choose to hold oil and other commodities, instead of the declining U.S. dollar. America needs to dramatically improve energy efficiency and develop renewable sources. The price of oil will stay up forever because it goes into making so many things the modern world depends on: Petroleum, food, plastics, fabrics. And food prices affect everyone around the world. Alternative energies are an increasing part of the world’s energy future, and America is not a world leader.

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Link Turn (Oil) Alternative energy solves oil shocks, which kill the economy Amy Jaffe, Baker Institute, congressional testimony on the roots of high oil prices, July 10, 2008, Cherry Creek News Alternative energy supplies provide ready substitutes if the price of oil rises too extremely and can shield the economy from the negative impact from disruption of any one fuel source. It has been shown that the lower a country’s energy consumption to gross domestic product (GDP) ratio or the shorter the period that oil prices will remain higher, the lower the cost of the tradeoff between inflation and GDP loss. New technologies exist on the horizon that could allow more gains in energy efficiency. Examples include micro-turbines for distributed power markets, improved vehicle technologies, including plug-in hybrid automobile technology, household solar technologies, among others. Electricity in the United States is generated without recourse to oil-based fuels, providing a unique opportunity for creative avenues for alternative energy policy that would promote the use of electricity in the transportation sector.

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Link Turn (Oil) 1/2 Oil shocks mean economic collapse is inevitable – we must develop alternatives now Ian Sample, Science correspondent for The Guardian, June 27, 2008, Final Warning Expensive fuel at the pumps is just the start. These battles over the price of oil could be the harbinger of something even scarier. There is a growing realisation that we are teetering on the edge of an economic catastrophe which could be triggered

next time there is a glitch in the world's oil supply. A number of converging forces are making such an event more likely than ever before. First, there is the spectacular rise in global oil consumption, which, according to the International Energy Agency (IEA) now stands at 87 million barrels of crude (about 10 billion litres) a day. Most geologists now accept we have reached, or will imminently reach, peak oil. Some fields in the US and the North Sea have been pumped dry and production is becoming increasingly concentrated within fewer countries. Add a boost from speculators betting that things will get even worse, chicanery by the Organisation of Petroleum Exporting Countries (OPEC) cartel which over the past two years has added Angola and Ecuador to its ranks to mask the decline in production of its existing members, and it's not hard to see why prices have been forced ever upwards. But price conceals the much more complex mess we're in. In the past, it has usually been possible to ride out any disruption to world oil flows - whether from accidents or hostile acts - by pumping more oil from the ground. That spare capacity has now all but vanished, as oil producers cash in on soaring prices by extracting as much of the stuff as they can. "There is absolutely no slack in the system any more," says Gal Luft, executive director of the Institute for the Analysis of Global Security, a Washington DCbased think tank specialising in energy security. It is this lack of wriggle-room that has brought us to the brink. In the days when oil producers had more leeway, they could make up for a disruption somewhere in the system by quickly raising production by around 3 million barrels a day, says Nick Butler, head of the Cambridge Centre for Energy Studies, part of the University of Cambridge's Judge Business School. That crucial reserve capacity has now fallen below the daily output of some producers - meaning that if the taps were turned off in any one of a number of unstable oil-supplying nations, such as Nigeria, Iraq, Iran or Angola, the impact would be felt almost immediately. This has left the oil market so fragile that a few well-placed explosives, an energy-sapping cold winter or an unusually intense hurricane season could send shock waves across the globe. The potential consequences are so serious that governments are drawing up emergency plans to cope should the worst happen. According to one analyst who took part in a simulation of just such a crisis, the situation most experts fear is what they call a "psychological avalanche". Here's what happens. A small, distant country one day finds it can no longer import enough oil because of a spike in prices or problems with local supply. The news media whip this up into a story suggesting an oil shock is on the way, and the resulting panic buying by the public degenerates into a global grab for oil. Most industrialised countries keep an emergency reserve as a first line of defence, but in the face of worldwide panic buying this may not be enough. Countries in which the oil runs out face transport meltdown, wreaking havoc with international trade and domestic necessities such as food distribution, emergency services and daily commerce. Without oil everything stops. The roots of our oil addiction can be traced back to the end of the 19th century, when petroleum began to be pumped from wells across America. It wasn't long before it become obvious what a great transport fuel it could provide. Oil-based fuels paved the way for intensive farming and extensive road networks; they drove the influx of populations into cities, drove growth in shipping and eventually made mass air travel possible. "Oil has shaped our civilisation. Without crude oil you'd have no cars, no shipping, no planes," says Gideon Samid, head of the Innovation Appraisal Group (IAG) at Case Western Reserve University in Ohio. And it's not just about fuels. A giant chemical industry relies on oil as its feedstock, and without it many of the products we now take for granted would vanish. "You'd see no plastics, no bags, no toys, no cases on TVs, computers or radios. It's absolutely everywhere," says Samid. "Much of the economic expansion and growth of the human population in the 20th century is directly tied to the availability of large amounts of cheap oil," says Cutler Cleveland, director of the Center for Energy and Environmental Studies at Boston University. "There isn't a single good or service consumed on the planet, except in rural economies, that doesn't have oil embedded in it. Oil is the lifeblood of the global economy." The secret of oil's success is its portability and extraordinarily high energy density. One barrel of oil contains the energy equivalent of 46 US gallons of gasoline; burn it and it will release more than 6 billion joules of heat energy, equivalent to the amount of energy expended by five agricultural labourers working 12-hour days non-stop for a year. The vast majority of oil is consumed by transport. In the US, that sector accounts for nearly 70 per cent of the 20.7 million barrels the country gets through each day. . More than half of the world's oil comes from seven countries, the leading supplier being Saudi Arabia, which produces more than 10 million barrels a day. Then come Russia, the US, Iran, China, Mexico and Canada. Twenty years ago, there were 15 oilfields able to supply 1 million barrels a day. Now, there are only four. The largest is the Ghawar field in Saudi Arabia. The IEA, which advises 27 countries on oil emergencies, requires its members to hold at least 90 days' worth of fuel, which can be pooled and released onto the market if a crisis looms. The system last swung into action in 2005 when hurricane Katrina caused the shutdown of more than 23 per cent of the US's oil production capacity. A few days after Katrina struck, the IEA ordered the release of 2 million barrels a day from reserve stocks for a month, the first time reserves had been released since the Gulf war in 1991. About half the world's oil is distributed by tankers mainly plying a handful of key routes across the oceans. The rest goes through an extensive network of pipelines that can carry different grades of crude and synthetic compounds, such as lubricants. The bewildering complex of pipelines - extending 90,000 kilometres in the US alone - crosses continents and dips under oceans. The pipelines are often above ground and vulnerable to accidental damage or attacks by saboteurs. When working, however, they provide an extremely efficient way of transporting oil. A pipeline that pumps a relatively modest 150,000 barrels per day delivers the equivalent of 750 oil tanker truck loads or one delivery every 2 minutes, day and night. Even if a pipeline is damaged, it can usually be quickly repaired. Valves at intervals along the pipe can isolate the leak while the damaged section is replaced. Disruption can still be costly. A report in 2005 by a US House of Representatives subcommittee on terrorism reported that sabotage to oil pipelines in Iraq had cost the country more than $10 billion in lost revenues, even though protection had been a high priority for the coalition troops since they invaded two years before. The report suggested that groups hostile to the US and its allies were becoming increasingly expert at mounting these attacks. Choke points Even outside a conflict zone, accidents can cause serious disruption. Last year, the IEA was on standby to release reserves after an explosion in Minnesota shut down part of the 5000kilometre Enbridge pipeline, which pumps 1.9 million barrels of crude a day from Canada to the US Midwest. This single incident



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Link Turn (Oil) 2/2 halted one-fifth of US oil imports for days. Oil deliveries by sea are vulnerable too. A fleet of 4000 tankers plying six main routes delivers more than 43 million barrels of oil every day. Many of these routes pass through narrow "choke points", and if any of these were to become impassable, even temporarily, the effect on oil supplies could be dramatic. For instance, more than 16 million barrels of oil a day are shipped through the Strait of Hormuz, at the mouth of the Persian Gulf, taking oil from Saudi Arabia, Iran, Iraq, Kuwait, Qatar and the United Arab Emirates to the US, western Europe and Asia. At its narrowest point, the strait is only 33 kilometres wide. If necessary, some of Saudi Arabia's exports could be diverted through the 1200-kilometre East-West pipeline to the Red Sea, but its maximum capacity is only 5 million barrels a day, half of which is already taken up. Between 1984 and 1987, during the Iran-Iraq war, both countries attacked tankers in the Strait of Hormuz, causing shipping to drop by 25 per cent. In 2003, the Bush administration claimed it had prevented further attacks on shipping in the strait. Another pinch point occurs in the Strait of Malacca, which narrows to just 2.7 kilometres between Sumatra and Singapore. Tankers from the Persian Gulf and west Africa transport some 15 million barrels a day through the strait en route to Japan, China and other Pacific destinations. A report by Luft claims that some tankers have been hijacked here by would-be terrorists whose initial aim has been simply to learn how to operate them. In 2003 a small chemical tanker called Dewi Madrim was taken over by 10 armed men, who sailed it through the strait before leaving with equipment and technical documents. One scenario being suggested is that hijackers might commandeer a liquid natural gas tanker plying one of these shipping routes, load it with explosives and use it to ram an oil tanker. If this floating bomb produced a burning oil slick, it could render the passage impassable for months, tipping the global economy into crisis as alternative routes would fail to make up the lost supplies. Another key element in the global oil infrastructure is Abqaiq, an enormous processing facility in Saudi Arabia, which removes sulphur from two-thirds of the country's crude. The CIA estimates that seven months after a large-scale attack, output would still be only 40 per cent of its full capacity. More than half the oil from Abqaiq is pumped to the largest offshore oil terminal in the world, Ras Tanura on the Persian Gulf, which handles one-tenth of the world's oil. This makes it a prime target for attack, and the site is as heavily defended as a military base. "If you have a facility like this and a plane crashed into it, or terrorists get in and somehow succeed in blowing it up, then you have a very, very significant disruption on your hands. That is what analysts see as a doomsday scenario," Lufts says. Reuters reported that one planned attack on the terminal was thwarted in 2006. Saudi oil production is particularly vulnerable because it is concentrated in a few massive production and distribution sites. "If one or two of these facilities goes down, then the entire system goes down," says Luft. So what would the impact be if oil supplies choked? In 2005, a group of current and former US government and national security officials were asked to address this in a live role-play exercise. Playing the part of the national security adviser was Robert Gates, who the following year became Secretary of Defense. The scenarios that unfolded were developed with officials from the Shell oil company in the Netherlands, a former US presidential counter-terrorism adviser and industry analysts. The simulation kicked off with an upsurge of political violence in Nigeria, the fifth-largest supplier of oil to the US. In the ensuing turmoil 600,000 barrels of oil production a day were lost from the Niger delta. The violence coincided with the start of a cold winter in the northern hemisphere, which increased demand by 700,000 barrels a day. Together, these events boosted the price of a barrel of oil from $58 to $82; a proportional rise today would push the price beyond $195. Events began to gather pace when, a month later, the simulation threw in an attack on the Haradh natural-gas processing plant in Saudi Arabia, which forced the country to cut 250,000 barrels per day from its exports - equivalent to the oil consumed every day in Switzerland - to meet domestic needs. Next, news arrived of an attempt to ram a hijacked supertanker into another vessel moored at a jetty at Ras Tanura. This was closely followed by a similar attack at the oil port of Valdez in Alaska, as well as a ground attack which set fuel depots alight. With the world oil shortfall now at 3.4 million barrels per day, the price per barrel had shot up to $123. Against the recent peak price of $139, that rise would take the cost per barrel to $295. The turmoil leads to an aggressive crackdown on anti-western groups and their sympathisers, which temporarily quells further attacks. Then, six months into the simulation, a terrorist campaign is launched against foreign workers in Saudi Arabia, killing 200 and wounding 250 within 48 hours. Evacuation of foreign workers follows. Though oil production continues unchecked, this loss of expertise leaves Saudi Arabia unable to meet future demand and with no spare capacity. Fears that this could lead to shortages in the future bring speculators into the market, and the price per barrel rises to $161. At the end of the simulation, global production has fallen by 3.5 million barrels a day, or 4 per cent of world oil supplies. One of the participants, Jim Woolsey, a former head of the CIA, described the scenarios as "relatively mild compared to what is possible", yet this proved enough to almost triple the price of a barrel of crude. The key conclusion being drawn from this scenario is how reliant the global oil market is on Saudi Arabia's ability to ramp up production on demand. If this extra oil is not available, the price rockets. Saudi Arabia's recent reluctance to increase production and the ensuing price rises in today's real-life oil market amply bear out this prediction. So where does this leave us at a time when global oil production is approaching the point when it stops growing and starts to decline? Most industry experts, including geoscientists and economists, who were polled by Samid in 2007 said that peak production will occur by 2010. This contrasted with a similar survey conducted two years earlier, in which respondents were split, with many of the economists opting for a later date. "Now, a real consensus is emerging," says Samid. This tells us that we will have to start making serious attempts to wean ourselves off oil, and fast. It will be no easy task. "It's hardly conceivable that the world could function without oil," says Didier Houssin, director of oil markets and emergency preparedness at the IEA. Finding a replacement fuel for transport is the biggest challenge. So far all the alternatives have hit the skids. For example, hydrogen, which could potentially replace oil as a green fuel if made using renewable sources of energy, has storage and distribution problems. While biofuels, which could be an easier replacement for fossil fuels, require feedstocks that compete with food crops for water and agricultural land. "To get these alternatives close to what oil can do, you have to invest a lot of money," says Cleveland, something most governments and energy companies have done reluctantly, and at pathetically low levels. "These aren't insurmountable problems, but they suggest the transition has some formidable challenges," he adds. One way or another oil will become more scarce, even more costly and will always have the disadvantage of generating carbon dioxide when it's burned. However hard it may be, the sooner we make the break, the better.

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Link Turn (Ethanol) Ethanol is key to the economy because it saves billions a year Robert Dinneen, President Renewable Fuels Association, July 16, 2002, Federal Document Clearing House Congressional Testimony Responding to the need for increased domestic energy resources, reduced air pollution from motor vehicles and rural economic stimulus, the Congress has consistently supported tax incentives to encourage the increased production and use of fuel ethanol. Today, refiners and gasoline marketers using 10% ethanol blends pay 13 per gallon in excise taxes, a 5.3 per gallon reduction from the tax paid on straight gasoline. The tax incentive is reduced to 5.2 per gallon in 2003 and 5.1 per gallon in 2005. The federal ethanol program has been an unmitigated success. From just 175 million gallons in 1980, the industry has increased more than ten-fold to more than 2 billion gallons today. As a result, farmers across the country have received higher prices for their commodities, more than 200,000 jobs have been created in rural America, the U.S. has reduced its oil imports, and most importantly, Americans are breathing cleaner air. Taxpayers also benefit because reduced farm program costs and increased income tax revenue attributable to the federal ethanol program provide a net savings to the U.S. Treasury of $3.6 billion a year. Indeed, for every dollar invested by the federal government to stimulate ethanol production and use, approximately $6 is returned to the treasury in tax revenue and savings from reduced government outlays.

Ethanol adds millions of dollars and thousands of jobs to the economy Robert Dinneen, President Renewable Fuels Association, July 16, 2002, Federal Document Clearing House Congressional Testimony Economic Benefits: The processing of grains for ethanol production provides an important value added market for farmers, helping to raise the value of commodities they produce. As the third largest use of corn behind feed and exports, ethanol production utilizes nearly seven percent of the U.S. corn crop, or over 700 million bushels of corn, adding $4.5 billion in farm revenue annually. The U.S. Department of Agriculture (USDA) has determined that ethanol production adds 25 - 30 to every bushel of corn. The production of ethanol has sparked new capital investment and economic development in rural communities across America. There has not been an oil refinery built in this country in 25 years. But during that time 63 ethanol refineries have been built, stimulating rural economies and creating jobs. USDA estimates that a 100 million gallon ethanol production facility will create 2,250 local jobs for a single community. Industry growth offers enormous potential for overall economic growth and additional employment in local communities throughout the country. According to a Midwestern Governors' Conference report, the economic impact of the demand for ethanol: Adds $4.5 billion to farm revenue annually . Boosts total employment by 195,200 jobs . Increases state tax receipts by $450 million Improves the U-S- balance of trade by $2 billion - Results in $3-6 billion in net savings to the federal Treasury.

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No Impact – Resilience The capital market system and global economy is resilient Gerd Häusler, October 7, 2005, Counsellor and Director of the IMF's International Capital Markets Department, El Financiero (Mexico), Why the Global Financial System Is More Resilient There are a number of reasons why we should be optimistic about continued international financial stability. First, capital inflows into the United States—most of them private—continue to finance the U.S. current account, and to support the U.S. dollar. These flows carry on unabated because of the country's favorable growth and interest rates, as well as its deep and liquid capital markets. They are unlikely to change direction abruptly since no other country or region enjoys the combination of robust growth and deep financial markets that the U.S. offers. Second, through countervailing forces, financial markets have a way of self-correcting. Institutional investors are unlikely to sit on the fence for long and will become less risk-averse. They cannot afford to stay in risk-free but low-yielding cash positions, and need to remain fully invested by searching for "undervalued" assets. There are additional market forces that make panic and contagion less likely. One is the growing importance of strategic institutional investors, like pension funds and life insurance companies, who take the long view, and are less likely to succumb to herd behavior. Another, is the increasing sophistication of institutional investors, who are able to differentiate between country- or company-specific versus systemic concerns. All in all, their diversity has increased over the years and so has their investment behavior. We should welcome this contribution to financial stability. All those factors that have strengthened the financial system over the past few years now provide a welcome cushion if the global financial system were to come under stress. They would allow market participants and policy makers time to adjust and, therefore, to avoid full-blown crises. The much-strengthened balance sheets of the financial, corporate and household sectors can serve as one such shock absorber for financial systems against severe market corrections. The wide dispersal of financial risk from the banking to nonbanking sectors, improved risk management, and the enhanced transparency and disclosure in financial markets also work in the same direction. As for emerging markets, fundamentals have strengthened as many countries have shown solid economic performance. They have also been building cushions against possible adverse developments, by accumulating reserves, undertaking early financing of external needs, and improving debt structures. Institutional investors like pension funds are increasingly making strategic allocations to emerging bond markets, and international investors are taking an interest in local currency bonds. This should help deepen national markets and reduce emerging market vulnerability to currency risk.

( ) Economic decline doesn’t cause war Morris Miller, Winter 2000, Interdisciplinary Science Reviews, “Poverty as a cause of wars?” V. 25, Iss. 4, p pq The question may be reformulated. Do wars spring from a popular reaction to a sudden economic crisis that exacerbates poverty and growing disparities in wealth and incomes? Perhaps one could argue, as some scholars do, that it is some dramatic event or sequence of such events leading to the exacerbation of poverty that, in turn, leads to this deplorable denouement. This exogenous factor might act as a catalyst for a violent reaction on the part of the people or on the part of the political leadership who would then possibly be tempted to seek a diversion by

According to a study undertaken by Minxin Pei and Ariel Adesnik of the Carnegie Endowment for International Peace, there would not appear to be any merit in this hypothesis. After studying ninety-three episodes of economic crisis in twenty-two countries in Latin America and Asia in the years since the Second World War they concluded that:19 Much of the conventional wisdom about the political impact of economic crises may be wrong ... The severity of economic crisis - as measured in terms of inflation and negative growth - bore no relationship to the collapse of regimes ... (or, in democratic states, rarely) to an outbreak of violence ... In the cases of dictatorships and semidemocracies, the ruling elites responded to crises by increasing repression (thereby using one form of violence to abort another). finding or, if need be, fabricating an enemy and setting in train the process leading to war.

WNDI 2008

12 Spending DA Aff

No Impact – Resilience There’s no impact to recession—the US economy will bounce back W. Michael Cox, senior vice president and chief economist at the Federal Reserve Bank of Dallas, Investor's Business Daily, 1-9-02 Since 1960, the average recession lasted 11 months, with declines of 2.1 percentage points in total output and 1.7% in employment. The previous downturn, an eight-month pause from August 1990 to March 1991, saw just a 1.5% slump in economic activity and a 1.1% drop in the number of jobs. Before 1940, only one in seven recessions was over by 11 months. A third of them hung on for at least 23 months. Between 1887 and 1950, recessions meant an average decline of 13% in industrial production. Since 1960, the toll has been reduced to 7%. Shorter, milder recessions arise from a shift away from the dominance of boom-to-bust industries, such as farming and manufacturing. The

economy has diversified, with volatile sectors not only being smaller slices of the pie, but also offset by more stable pieces, such as trade and services. Recessions are part of the system. Periods of economic slowdown serve a purpose in a capitalist economy. The pauses allow for time to correct excesses - rising inflation, bloated inventories, excess capacity, supply bottlenecks and misallocation of resources. Boom times hide the excesses, and they're wrung out during the down months. In recession an economy reorganizes itself, reallocating resources to emerge more efficient and productive. Layoffs are traumatic, but labor and other resources are freed for eventual use in the next wave of enterprises. Thousands of dot-com companies may have gone belly up, but we didn't lose their know-how. The technology and human resources are still here. Recession doesn't equal regression. We can reuse what we learned. Recessions are to some extent self-correcting. Now that a slump is here, the economy won't continue to spiral downward. Once down, it won't stay down. In an economy where markets provide continual feedback, behavior and expectations can change quickly. As demand falters, companies cut costs and reduce inventories. Prices adjust downward. Consumers react by buying more, reviving demand. Policy responses are part of the cure. The Federal Reserve moved aggressively in 2001 to lower interest rates. Credit is now cheaper than any time in the past 40 years. Looking ahead, the economy maintains considerable strength. Inflation remains tame at less than 2%. Real personal income continued to grow in 2001, so consumers have more money to spend. America still sits on a mother lode of new technologies - from electronics to medicine. The spirit of enterprise never lies dormant, not even in recession. Thus, the U.S. economy already has the makings of the next boom.

US Econ is resilient-9/11, Katrina, oil prices, and tech balloon prove Christian Science Monitor “US economy chugs ahead despite auto and housing slumps” 12/11/2006 The economy's resilience has been a theme of several years' standing - one that predates the 9/11 attacks. The US output of goods and services has survived the damage of hurricanes Katrina and Rita, a run-up in oil prices, and the bursting of the high-tech balloon in early 2001. One reason for its capacity to take hits is its growing diversity. Indeed, last month's new jobs came in health and financial services, travel, government hiring, and professional services - all helping to offset a struggling manufacturing sector. Even in manufacturing, the picture is not as bleak as it could be, in part because vigorous economies abroad are buying American-made goods. "It takes a lot to get the economy down," says Ethan Harris, chief economist at Lehman Brothers in New York. "It does have some natural resilience in the face of shocks."

The economy empirically recovers without impact Peter Lynch, Vice Chairman, Fidelity Management & Research, ABC News, Good Morning America, 9-18-01 Well we--you may not and it may take a little while. It is going to be choppy. I mean, people aren't going to decide when they're seeing news like this to go out and buy a sofa, go buy a refrigerator. It's just very discouraging. So that tends to slow consumer confidence. The confidence of the consumer has been very high. We have record housing sales, housing prices have gone up the last few years. As much as the stock market has gone down, housing prices--the average house has gone up more. So there's a lot of good things out there. The

We've had nine recessions since World War II--this might be number 10--but we've got out of every one of them. And the stock market usually looks forward. It doesn't look backward. So for a little while look to this uncertainty, but then I'll say, 'What are we going to earn in 2003, 2004, 2005.' The market looks out, it doesn't look backwards. banking system is in very good shape. We have a lot of positives.

WNDI 2008

13 Spending DA Aff

No Impact – China Economic ties prevent US-China trade war The Vancouver Sun, July 14, 2008, Money ties China, U.S. together The economic ties between China and the U.S. run deep. China relies on the U.S. as their largest export market, just as the Americans rely on China to fuel its outrageous consumption with cheap imports. "It's kind of like the relationship between a junky and a dealer," explains economics expert Nicholas R. Lardy of the Peterson Institute. "The junky needs the dealer so he can get his fix, but the dealer also needs the junky to buy his drugs." Trade between the two nations is rising at a dizzying pace. In 1980 their trade totalled $5 billion; last year it was $387 billion. It is also heavily lopsided. The U.S. imports far more from China than it exports, resulting in a trade deficit of over $250 billion. This enormous consumption is rapidly pushing America's debt towards $10 trillion. The numbers can get overwhelming and the question becomes: How does America stay afloat? The U.S. economy is buoyed by foreign investment into its treasury securities. Japan still possesses the largest holdings, but China is catching up. Since 2000, China's ownership of U.S. securities has grown from about $50 billion to over $500 billion. Some political pundits are concerned that by becoming America's banker, China could exercise significant influence over the U.S. But that's not really the case. There's an old adage that says, if you owe the bank $100, that's your problem. If you owe the bank $100 million, that's the bank's problem. China is now so deeply invested in U.S. securities, any disruption to the value of the dollar would be a serious blow to its own reserves. And since the Chinese rely on the U.S. market for their exports, they're forced to buy up new securities as soon as they're issued to prevent the yuan from appreciating against the dollar. Neither country holds a significant advantage over the other. Despite the enormity of the U.S. economy, the two nations have built a system of co-dependency. Or as Catherine Mann, professor of economics at Brandeis University and former adviser to the chief economist at the World Bank, puts it -- a system of Mutually Assured Destruction. I think you can characterize it a lot like nuclear weapons," she says. "Whoever uses the weapon, invariably gets hurt too." Each country has the means to significantly disrupt the other's economy, but the collateral damage within their own country could be just as severe.

China is rising peacefully and is working cooperatively with other nations. David Shambaugh, Director of the China Policy Program @ George Washington University. International Security, Volume 29, Issue 3, Winter 2005. “China Engages Asia.” http://www.brookings.org/dybdocroot/views/articles/shambaugh/20050506.pdf China’s growing economic and military power, expanding political influence, distinctive diplomatic voice, and increasing involvement in regional multilateral institutions are key developments in Asian affairs. China’s new proactive regional posture is reflected in virtually all policy spheres— economic, diplomatic, and military—and this parallels China’s increased activism on the global stage.1 Bilaterally and multilaterally, Beijing’s diplomacy has been remarkably adept and nuanced, earning praise around the region. As a result, most nations in the region now see China as a good neighbor, a constructive partner, a careful listener, and a nonthreatening regional power. This regional perspective is striking, given that just a few years ago, many of China’s neighbors voiced growing concerns about the possibility of China becoming a domineering regional hegemon and powerful military threat. Today these views are muted. China’s new confidence is also reflected in how it perceives itself, as it gradually sheds its dual identity of historical victim and object of great power manipulation. These phenomena have begun to attract growing attention in diplomatic, journalistic, and scholarly circles, both regionally and internationally.2

WNDI 2008

14 Spending DA Aff

No Impact – Competitiveness The US will inevitably lose competitiveness across numerous economic sectors The Washington Times, 5-4-04, http://washingtontimes.com/upi-breaking/20040504-050045-2289r.htm Geneva, May. 4 (UPI) -- The United States, Singapore, and Canada have been ranked as the world's leading economies on competitiveness in 2004, according to a global survey published Tuesday. But the study concludes the strong emergence of the larger Asian nations spearheaded by China, and India, and soon Russia and central Europe "will generate a major shift in world competitiveness." The new breed of emerging competitors, it says, "don't only provide manufacturing or services to western companies; they compete in their own right with their own brands. They will assail markets, just as Japan did before, but on a much wider scale." Globalization of the world economy, the study notes, has "quickly spread the productivity revolution and techniques" to poor developing countries and underscores they now benefit from both "lower labor costs and higher efficiency output." The report by the Lausanne-based International Institute for Management Development (IMD) warns this combination "could be lethal for traditional industrial countries and their workforce. Jobs will be lost, and companies activities will move abroad." It adds the trends begun in the manufacturing sector now also affects the services industry.

“Economic competitiveness” is conceptually flawed: failure to compete doesn’t matter Paul Krugman, Professor of Economics at the Massachusetts Institute of Technology, March/April 1994, Foreign Affairs, http://www.pkarchive.org/global/pop.html It was a disappointing evasion, but not a surprising one. After all, the rhetoric of competitiveness -- the view that, in the words of President Clinton, each nation is "like a big corporation competing in the global marketplace" -- has become pervasive among opinion leaders throughout the world. People who believe themselves to be sophisticated about the subject take it for granted that the economic problem facing any modern nation is essentially one of competing on world markets -- that the United States and Japan are competitors in the same sense that Coca-Cola competes with Pepsi -- and are unaware that anyone might seriously question that proposition. Every few months a new best-seller warns the American public of the dire consequences of losing the "race" for the 21st century.ffi A whole industry of councils on competitiveness, "geo-economists" and managed trade theorists has sprung up in Washington. Many of these people, having diagnosed America's economic problems in much the same terms as Delors did Europe's, are now in the highest reaches of the Clinton administration formulating economic and trade policy for the United States. So Delors was using a language that was not only convenient but comfortable for him and a wide audience on both sides of the Atlantic. Unfortunately, his diagnosis was deeply misleading as a guide to what ails Europe, and similar diagnoses in the United States are equally misleading. The idea that a country's economic fortunes are largely determined by its success on world markets is a hypothesis, not a necessary truth; and as a practical, empirical matter, that hypothesis is flatly wrong. That is, it is simply not the case that the world's leading nations are to any important degree in economic competition with each other, or that any of their major economic problems can be attributed to failures to compete on world markets. The growing obsession in most advanced nations with international competitiveness should be seen, not as a well-founded concern, but as a view held in the face of overwhelming contrary evidence. And yet it is clearly a view that people very much want to hold -- a desire to believe that is reflected in a remarkable tendency of those who preach the doctrine of competitiveness to support their case with careless, flawed arithmetic. This article makes three points. First, it argues that concerns about competitiveness are, as an empirical matter, almost completely unfounded. Second, it tries to explain why defining the economic problem as one of international competition is nonetheless so attractive to so many people. Finally, it argues that the obsession with competitiveness is not only wrong but dangerous, skewing domestic policies and threatening the international economic system. This last issue is, of course, the most consequential from the standpoint of public policy. Thinking in terms of competitiveness leads, directly and indirectly, to bad economic policies on a wide range of issues, domestic and foreign, whether it be in health care or trade.

WNDI 2008

15 Spending DA Aff

No Impact – Competitiveness Monetary policy has the biggest impact on US competitiveness and foreign nations and the US will always manipulate it to undermine US competitiveness Pat Choate, director of the Manufacturing Policy Project and professor in Advanced Issues Management at George Washington University, and Charles McMillon, 1997, http://www.cooperativeindividualism.org/choate_trade_deficit.html Changes in exchange rates alter the price competitiveness of goods and services virtually overnight. When the dollar is strong, the competitiveness of US exports is reduced and that of foreign imports is increased. The reverse is also true. Many other governments explicitly use their exchange rate as a balance wheel to set the level of their trade balance. The Chilean government, for example, is currently manipulating their Peso, which does not float freely. They have recently re-weighted the basket of currencies to which the Peso is pegged. Much like the recent experience in Mexico, the Chilean Government's goal is to maintain a US trade surplus with Chile during the time Congress considers Chile's accession into NAFTA. US policy makers have never developed an exchange rate policy and rarely consider the exchange rate consequences of economic policy. The Plaza Accord of 1985 in which the U.S. joined with other industrial countries to weakened the dollar and to improve the US trade position was a rare exception. The value of the dollar to the Yen fell from 256 Yen per dollar in 1985 to 82 per dollar in the mid-1990s. This currency manipulation provided temporary trade relief. Nevertheless, other nations increased their competitiveness to offset the US move and again the US trade deficit soared. Japanese auto makers, for instance, are competitive at an exchange rate of 90 Yen per dollar. Virtually every other time that the U.S. Treasury has engaged significantly in exchange rate measures has been to assist other countries or global financial interests. In 1995 -- as the U.S. faced record trade deficits -- the US Treasury increased the value of the dollar against the Yen to assist Japan's Government and banking sector deal with a recession and financial pressures. The result of US actions was to reduce the cost-competitiveness of US products in the Japanese market and increase that of Japanese manufacturers here. It worked. Japanese auto makers are now flooding the US market with their exports. The U.S. trade deficit soared to a new record in 1996 and seems assured of setting another record in 1997. In short, the price competitiveness of goods in many nations is as much a function of the Government exchange rate policy -- theirs and ours -- as of producers' competitiveness. The net effect of all this is fewer US export receipts and more foreign import bills.