A Christian Liberal is NOT an oxymoron.

Posted by XT on July 23rd, 2008 in General

I was talking to a friend today about the Conservative Movement. When it began to exert its muscle in the early 1970s, the country was locked in an unpopular war in Vietnam, our economy was suffering (unemployment rising, falling wages, etc), and we were headed into a decade-long energy crisis. Thirty-plus years later, we are locked in two unpopular wars in Iraq and in Afghanistan, our economy is suffering (unemployment rising, falling wages, etc.) and we look to be headed into an energy crisis that promises to last at least a decade.

The bad news for Conservatives is that we’ve been here before. Thirty-odd years of “standing athwart history crying “Stop!”" has not done anything for us. It has only brought us full-circle, with the added bonus of dividing our electorate to where people view the other party as fundamentally bad people instead of simply good people that disagree.

The good news for the rest of us is that we have been here before. Thus, we know that we will survive. We can’t say exactly how long it will take, but the economic pressures of insanely high energy prices will eventually level off. Then our economy will recover and we’ll procede.

The above graph shows the price of oil on the world market over time. Beginning in 1973, we see a sharp rise in energy prices, followed by a plateau, then another steep rise beginning in 1978. From 1973, when the first oil shock hit, until 1981, when the second shock broke, the price of oil rose from around $18 a barrel up to about $62 a barrel. That’s a rise of 344% over a period of eight years.

Now look at the spike that begins in 2001. Prices rise from an insanely low $23 a barrel and we know now that it continues in 2008 until it reaches just over $145 a barrel. That’s around 630%. Ye-ouch.

Meanwhile, back in the 1970s, the Bureau of Economic Analysis shows us gives us this data:

Year	Nominal GDP	Real GDP
1973	1,382.7	4,341.5
1974	1500.0	4,319.6
1975	1,628.3	4,311
1976	1,825.3	4,540.9
1977	2,030.9	4,750.5
1978	2,294.7	5,015.0
1979	2,563.3	5,173.4
1980	2,789.5	5,161.7
1981	3,128.4	5,291.7
1982	3,255.0	5,189.3
1983	3,536.7	5,423.8

You’ll note that GDP rose from $1,382.7 billion in 1973 to $3,128.4 in 1981. If you adjust for inflation in chained 2000 dollars, it rose from $4,341.5 billion to $5,291.7 billion. Over the entire period, our economy did pretty well (though some of us did better than others and some outright suffered). More than likely, our overall economy will also grow during these rough times, too.

In order to see the contraction of our economy, you have to use the inflation-adjusted data. When prices spiked in 1973, our economy shrank in ’74 and ’75. When prices spiked in ’78, we continued to grow initially, but shrank from ’79 to ’80. The economy also stumbled from ’81 to ’82 after a year-long recovery.

Despite the incredible price spiral for oil in this century, the economy has not yet stumbled. Part of that is due to the increased size of our economy – it’s more than twice the size it was in the 1970s. Partly, it is simply a function of time – we don’t have all of the data for this year, and won’t until about halfway through next year.

Look for a similar pattern, though, I think. Price spike, a year or two later, the economy shrinks. Then people adjust and it begins to grow again. As long as we have a few years of stability, we can adjust to $4.00 a gallon gasoline. If, however, fuel prices spike again next year and we have to deal with six or eight dollar a gallon gasoline; then we’ll have another setback period.

There’s some things to think about. The plateau in growth was due to the US economy – and the rest of the world as well – adjusting to higher fuel prices. The crash in oil prices in the early 1980s was due to over-production of oil caused by increased exploration brought on by higher prices. I don’t look for that to happen again. It is possible that increased production could hold prices down, but I don’t think it will send them back below $100 a barrel.

As odd as it sounds, the cure for our ills is to do nothing drastic. I believe that the government should repeal the Bush tax cuts and pump up the economy from the bottom, but that would simply go back to doing what we were before he took office. Increased unemployment and retraining funds would help immensely. Programs to help home owners keep their homestead – not their spec houses – would also help. Spec mortgages (houses bought with the intent to flip them for quick profit) should be allowed to fail. That’s the risk inherent in the process and it will definitely hurt some people – but it will also cause home prices to head back down (as we are seeing in many places). Families should be prioritized ahead of investors (in my opinion).

We can’t change the world and we will eventually evolve to fit our place in it, just like we did thirty years ago. We simply need to quit pretending we are stuck in the past and to help out the people that need a hand to get through this rough patch.

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