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The peak oil crisis: government in transition

All it takes is a snowstorm or two to remind us how dependent we have become on government at all levels.

Sitting at home waiting for the plows should remind the more perceptive among us that we are no longer in the 18th century where nearly every family, equipped with an ax and a rifle, could provide for its own food, safety, shelter, and general well-being without the need for outside help. Today, when the lights go out, we rely on government to rush us to shelter where we are kept warm, fed, and even entertained until the lights come on again.

It is amazing how many among us still don't grasp that we are an interdependent whole, needing many specialized skills and institutions to sustain life. In today's America, only a miniscule percentage has the skills, knowledge, land, and lifestyle to survive without outside help. For most of us, it is the collective, in the form of government, that holds our civilization together - water, sewers, public health, roads, buses, and yes, even snow plows.

By now, most of us have figured out that in the U.S., government at all levels is in trouble. Revenues are dropping like bricks; the national debt is now $12.3 trillion and is increasing at $3.8 billion a day. Over the last 30 years, the American political system has morphed into such polarization, and government-supporting taxes have become so demonized, that few politicians can or even want to try stopping the decline. Economists with an historical bent tell us that when the ratio of government debt to GDP gets to 90 percent (we are now at 84), it is all over - fiscal collapse. Some are optimistic that this won't happen in modern-day America - we should know shortly.

States and local governments are in worse shape. Lacking the power to print money and, given the political climate, the will to raise taxes, all that governments can do is cut and cut and then, cut some more. Here in Virginia we appear to be on track to eliminating some 50,000 government jobs in the next fiscal year - teachers, police, highway workers; the list goes on and on. Expenditures that might be considered "fat," or nice to have rather than need to have, disappeared in earlier rounds of budget cuttings.

With borrowing maxed out, and federal, state, and local revenues still falling, it looks like massive defaults on government debts are not very far away. Fiscally weaker states, such as California, New York and Rhode Island, and assorted local governments will be first. At some point, be it this year, next, or ten years from now, the United States government seems likely to go over a tipping point. All the trends and all the numbers say, or more accurately scream, that this is going to happen. The political gridlock in America makes it unlikely that a consensus on effective action - massive tax increases, coupled with massive curtailments in spending - is going to happen in time.

At some point, the United States government seems likely to go over a tipping point.

Lets look at state and local governments first as they provide most of the hard services that people actually use such as streets, water, and protection. The Federal government, in general, provides us with more amorphous services such as defense and securing the homeland. Granted the federal government hands out prodigious amounts of currently-valuable "money" to many of us, but then again only Washington is allowed to print money in addition to taxing us.

Given that we are only months away from serious curtailments of state and local services, reaction to the problem should come shortly. While the demonizaton of government still holds sway in many places and has even had a kind of rebirth in the Tea Party movement, close observers can detect the first stirrings of reaction.

Some are starting to understand that allowing the schools to wither, closing the jails, and letting disease run rampant may not be the best thing to let happen while we still have the resources to prevent it.

The first reaction of many will be to run to their federal representatives and demand that Washington pay the bills until an economic rebound occurs. This path, of course, is painless: no tax increases, the schools stay open, and the ambulance still comes. Indeed, another Washington bailout may be the most likely outcome for the immediate future until the federal government reaches some breaking point - the dollar collapses, driving up gasoline prices, or interest rates soar, or hyperinflation takes hold. Take your pick!

What is clear, however, is that many of our state and local governments are on the verge of major changes in the services they provide, how money is raised, how they are organized, and their political dynamics. Super-majorities, silly public referenda and various other schemes that have been concocted to give one political side or the other an advantage will eventually go. Perhaps constitutional conventions will be summoned to overhaul state governments or new charters granted to towns and cities. Regionalism is already on the rise as localities struggle with dwindling resources.

In the coming era, it is likely that there will be demands for new services - such as providing jobs for the masses of unemployed, growing of food for the hungry and developing alternative forms of punishment. The mix between government and private industry is changing rapidly (ask General Motors) and is going to change even more. Many will cry "socialism," but their voices will soon be lost in the realization that massive social unrest seems the most likely alternative to government ownership.

How and when, the remaking of American government will take place is far from clear, but the seeds have already been sown.

Tom Whipple is a retired government analyst and has been following the peak oil issue for several years.

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