Before he began making his own movies, Mel Brooks was a television comedy writer.
One of the lines he wrote for an interview skit on Sid Caesar’s show was recycled and used years later by Brooks himself — in interviews given after his successful movies had made him famous. Explaining the difference in theatrical forms, he said, “Tragedy is when I get a hangnail; comedy is when you fall into an open manhole and die.”
Like many great comic lines, there is a lot of truth behind the laugh. We do tend to be self-referential; the exaggeration allows us to mock ourselves for it.
Likening our economic mess with the Depression of the 1930s is just one recent example of our hangnail-death standard of comparison. In the Depression, for example, thousands of banks failed and since there was no federal insurance, the banks’ depositors lost all their money. By contrast, there have been only 17 bank failures so far this year and depositors have not lost a dime.
This month, unemployment in the U.S. reached 6 percent, and while that is not as good as the 5 percent we have enjoyed for some years now, it is a long way from the estimated 20 percent to 25 percent of American workers without jobs during the Depression.
The comparisons of our current miseries to the 1930s Depression are so self-referential and so out of proportion that step one in our economic recovery is obvious: get over ourselves.
Step two, of course, is a little more complicated. Economics is involved, and you know how that goes.
With the exception of Congress, Hollywood, and the television news industry, no group of individuals or institutions is more relentlessly self-referential than Wall Street. And we should keep that in mind when it is the source of this question about our economy: can the energy sector lead our economy back to prosperity?
What Wall Street is looking for are the next stocks to pick, nothing more. But the question, this time, is a good one.
There is no doubt that increased energy independence should be included in the short list of things we must do to in order to restore and protect our economy. A case can be made that we wouldn’t be in this mess now if it were not for our dependence on foreign oil. When crude oil prices spiked, the increased costs of imported oil sucked investment out of the U.S. and stunted consumer spending just at the time when our monetary policy response to racing commodity prices — higher interest rates — popped the housing market credit bubble and the financial markets came tumbling down.
Maybe the credit markets would have imploded anyway. We will never know. But it is just possible that without the added pain of the oil price spike the housing market bubble would have suffered a significant retrenchment — and our economy would have simply absorbed it as it has absorbed our other stupidities in the past.
So there is an economic incentive, as well as a national security motive, to restructure our energy sector.
There are a few fundamentals that we need to take into account, though, before we put our faith or hope in the energy sector’s ability to lead us back to prosperity.
The energy sector is extremely sensitive to global oil prices, which are both volatile and not at all subject to our control. Our energy policy for this sector, then, has to accept this and take a longer-term approach. Any investment, public or private, can look so very smart — and a few months later can be transformed by oil price changes into a monument to folly. We have to keep our eyes on the goal and structure our economic policy accordingly.
Energy investments, even using existing technology, typically take a long time to pay off and are therefore inherently risky even when times are less turbulent. Even drilling new wells in existing fields takes a considerable amount of time. Introducing new technology, as in wind turbines, solar power, biomass and refined coal, adds investment risk in terms of cost and uncertainty.
Effective use of tax incentives to encourage energy investment, then, must take the length of the investment cycle into account. Year-by-year tax policies driven by shifting political winds will only profit those who successfully game the system. It will not bring us energy independence.
The security and economic benefits of energy independence will have to be purchased at the price of making tough, long-term decisions, both public and private, right now. Of course, we could just sit around as the economy recovers and wait for the next oil price run up to torpedo it. But that would be tragedy, not comedy. And we know the difference.
James McCusker is a Bothell economist, educator and consultant. He also writes a monthly column for the Snohomish County Business Journal.
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