Spending Da Evidence

Chris Gardener, “10 Reasons Not to Invest In Nuclear Energy”, Center for American Progress, July 8, 2008, http://www.americanprogress.org/issues/2008/07/nuclear_energy.html The American nuclear industry has benefited from $100 billion in direct and indirect subsidies since 1948, and nuclear power provides 20 percent of electricity in the United States. The technology behind nuclear power is fully developed, so nuclear energy is unlikely to get much cheaper. Continued subsidies would be necessary to make nuclear cost-competitive with other energy sources, but will not lower the overall price of nuclear power.

Deloitte Research—Global Economic Outlook for 2007, Pg. Online (Is a Crisis Imminent, or are things better than we thought) To begin with, a basic fact: The US invests far more than it saves (its current account deficit) and the rest of the world saves far more than it invests (a current account surplus). This is the big imbalance in the global economy. It involves a massive flow of capital to the US from the rest of the world. The magnitude of this transfer is unprecedented in recent history and probably cannot be sustained indefinitely. Therefore, when it ends, it could have a destabilizing effect on the global economy, if only because of the shifting of gears. Some pundits argue that financial market participants recognize this fact and will ultimately move exchange rates and interest rates in a direction that will lead to a gradual decline in the imbalance. Yet the imbalance has persisted far longer than anyone expected without onerous consequences. Perhaps we have entered a new era in which massive one-way capital flows can take place for long periods without any serious consequences. So were the pundits wrong, or is the terrifying hard landing imminent? Well, consider the possible explanations for the imbalance. This may help predict the likely future scenario. The imbalance will become unsustainable once the rest of the world becomes reluctant to finance America’s largesse. At that point, the dollar will drop and interest rates will soar, pushing the US into a recession and wreaking havoc on the global economy. Research has warned of this outcome in past publications. Moreover, there is a historical precedent for this scenario. In the late 1970s and again in the late 1980s, a large US current account deficit was ultimately unwound through large dollar depreciations, rising interest rates, and recessions. This was followed by financial crises in emerging markets. The pessimists believe that this could happen again, but possibly on a larger scale. Thus, the global imbalance is the result of a “perfect storm of exceptional situations.

Perhaps the world is currently in the eye of the storm. As with real storms, things get pretty ugly after passing through the eye.

Orszag Rubin and Sinai in 04, http://www.brookings .edu/views/papers/orszag/20040105.htm As CBO notes, these various effects of an unsustainable fiscal policy could become extremely costly: “Taken to the extreme, such a path could result in an economic crisis. Foreign investors could stop investing in U.S. securities, the exchange value of the dollar could plunge, interest rates could climb, consumer prices could shoot up, or the economy could contract sharply. Amid the anticipation of declining profits and rising inflation and interest rates, stock markets could collapse and consumers might suddenly reduce their consumption. Moreover, economic problems in the United States could spill over to the rest of the world and seriously weaken the economies of U.S. trading partners. A policy of higher inflation could reduce the real value of the government’s debt, but inflation is not a feasible long-term strategy for dealing with persistent budget deficits….If the government continued to print money to finance the deficit, the situation would eventually lead to hyperinflation. One a government has lost its credibility in financial markets, regaining it can be difficult.

Foreign investors are critical now; otherwise the US won’t sustain its economy Joespeh Biden, “US troubles are truly global”, Forbes.com, July 7, 2008 At a minimum, it will be another reminder that no matter how hard we pull on our own oar, we will not get through these challenges without coordinated effort. We are no longer the sole engine of the global economy, nor can we solve our own problems in isolation.

John Sterlicchi, “Microbe Economies”, The Guaridian.co.uk, June 27, 2008, http://www.guardian.co.uk/business/2008/jun/27/green.fuel.algae Being careful, according to Metcalfe, is not making bad investments. Just as in the heyday of internet start-ups, Metcalfe predicts that "charlatans" will roam the alternative energy space, making outrageous claims for unproven technologies. They will receive millions from gullible investors and then never be heard of again.

Drying up of foreign investors will push the U.S. into a recession and wreak havoc on the global economy