The Gravity of Our Economic Situation

By Janet Gellici, ACC Chief Executive Officer

The reference to Newton’s Cradle in this issue of American Coal is quite apt in light in recent world events and implications for the energy industry.

I’m doing my best to make sense of a world that seems to have turned upside down while I was away on holiday – one of those unplugged, off-line holidays. I returned to the news that Congress had sorted out (sort of) deficit and FY2012 budget issues, Standard & Poor’s had downgraded the U.S. government debt rating, riots were underway in Israel and Great Britain, and the stock market was somersaulting more than Six Flags’ totally twisted roller coaster.

I felt a bit like Rip Van Winkle and I definitely felt like turning around and heading back to my no-news-penetrates-these-walls log cabin. Unfortunately, no such luck. Descending back into the “real” world in the midst of these unprecedented events left some rather vivid impressions.

Newton’s First Law of Motion: An object at rest tends to stay at rest; an object in uniform motion tends to stay in uniform motion (Law of Inertia).

We’ve been grappling with an economic downturn since late 2008 and with a burgeoning deficit for decades. Little decisive or effectual activity has been undertaken; efforts to address these issues have been infamously stalled by raucous bipartisan infighting. What’s certain going forward is that the activities of the Super Committee (Joint Select Committee on Deficit Reduction) will be the primary focus of Congress this fall, with little else likely to be addressed or accomplished.

The Budget Control Act of 2011 increased the federal debt limit by $900 billion while also requiring $917 billion cuts in discretionary spending over the next decade. The Act also requires an additional $1.5 trillion reduction in the federal deficit over the period 2012-2021. The Super Committee of 12, comprised of Democrats and Republicans from both the House and the Senate, is tasked with crafting legislation to achieve the $1.5 trillion reduction that’s to be voted on by both Congressional branches by December 23rd, 2011. All objects will be in motion this fall.