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Federal Dollars and Developments in Energy Policy

posted on June 26, 2009

Hello, I'm Mark Pearson. Reports released this week have economists saying the end of the recession may be near. Despite the good news, a bumpy ride lies ahead as the U.S. recovers from its longest economic slump since World War II.

The Federal Reserve met this week and concluded the recession would end later this year. Fed Chairman Ben Bernanke left interest rates alone because he believes the weak economic situation will keep inflation "subdued for some time."

With traders uncertain when the turnaround might occur, Wall Street opened the week with a 200 point drop but reports aided a modest rebound.

One signal of economic recovery was found in personal spending -- which accounts for a large portion of U.S. economic activity. The indicator showed a jump of three-tenths of one percent -- in spite of a forecast decline.

Another gauge the economy could be "bottoming out" was seen in Gross Domestic Product figures. The GDP posted a 5.5 percent decline in the first quarter of 2009 -- much healthier than the anticipated 5.7 percent fall off.

Other factors bolstering the case for recovery were seen in orders for durable goods. The Commerce Department reported an increase of 1.8 percent in the first quarter of 2009 instead of a predicted contraction.

Rural America got some assistance of its own this week both inside and outside the beltway. Farm state lawmakers worked to put more money in farm country by making changes to a landmark environmental bill. And the Obama Administration sent Energy Secretary Steven Chu out to jump-start the heartland with some energy stimulus dollars.

Federal Dollars and Developments in Energy Policy

Sec. Steven Chu, Energy Dept.: "And I think once we get the United States to rev up its innovation machine we can conquer the world. We've done it in the past and we can do it again."

Stimulus dollars landed in America's heartland this week as the Obama Administration's top energy official announced millions in new spending. Energy Secretary Steven Chu (CHEW), speaking in Iowa this week, said targeted stimulus funds for energy investments are crucial in both Urban and Rural America.

More than $38 Billion in Energy Department funds stem from the American Recovery and Reinvestment Act signed by President Obama this past February. Secretary Chu emphasized the first round of dollars are a test for a variety of energy companies and subsequent funds will be tied to performance.

Speaking in the nation's top ethanol-producing state, Chu pledged support for outfitting all cars with E85 capability.

Sec. Steven Chu, Energy Dept.: "If it only costs $100 out of $15,000 wouldn't it be nice to put in those fuel lines so we can get any ratio we want."

Shifting the discussion from renewable energy to climate change, Chu laid out a possible scenario for America's Heartland over the next 50 years.

Sec. Steven Chu, Energy Dept.: "It's very strange. You're going to get more flooding in the winter and spring and you'll have drought conditions in the summer. If there is any reason to wonder why we're developing wind and why we're transitioning to biofuels or energy-efficient buildings – this is why."

Chu's comments regarding climate change are especially important with the backdrop of landmark cap-and-trade legislation on Capitol Hill.

Farm-state lawmakers, led by House Agriculture Chairman Collin Peterson, reached a crucial agreement this week with Congressional leaders.

Rep. Collin Peterson, D-Minnesota: "And that's why EPA should not be in charge of our farms."

Peterson successfully lobbied Democratic leaders to prevent EPA oversight on various agriculture programs. Under the proposed Waxman-Markey climate change bill, USDA would maintain control over "environmentally-friendly" projects in agriculture sectors.

Another key development involves a significant triumph for the ethanol industry. Under a new agreement, the Energy Department, USDA, and EPA would have five years to reach a consensus on the role of biofuels and indirect land use.

But consensus on cap-and-trade rules in the bill is far from certain. Some lawmakers and utility companies suggest the legislation could dramatically inflate energy costs for millions of Americans. The American Farm Bureau Federation remains opposed to a bill it calls "seriously flawed."

Proponents argue cap-and-trade provisions are the only way to monetize carbon and prevent the future affects of climate change.


Tags: biofuels climate change energy policy ethanol global warming government news