Greetings!
As the U.S. economy generally, and the plumbing-heating-cooling-piping sector specifically wind their way to the end of a fragile recovery year, there are several bright spots shining through the dark clouds of unsustainable debt/deficit levels, and an unimproving employment scenario that has wallowed in the mid-teen percentage range, when considering all those seeking full-time employment.
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| Morris Beschloss |
Most of the good news is emanating from the industrial PVF sector, which is benefitting from the intense "fracturing activity" in such oil production areas as the New York/Pennsylvania-centered Marcellus Range, and the Bakken belt, which covers North Dakota and Montana, as well as parts of Canada's Manitoba and Alberta Provinces. Additional "fracking" finds are now popping up in West Texas and on federal lands in the Rocky Mountains.
The existing oil refineries have never been busier and are expanding on site. Additionally, they are catching up on repair and maintenance, due to the revenues generated between their relatively low buying price of West Texas Intermediate crude stored in Cushing, Oklahoma; and the $25 higher world price, on which refineries base the cost for gasoline sold to retailers. Also aiding the pipe-valve-fitting sector is the facilities catchup by electricity generating utilities, whose project level is the highest in years.
Although the residential construction arena is depending on energy conservation, maintenance, and upgrading as homeowners are staying put, the rental sector is making a significant comeback, providing additional work for mechanical contractors, as high rise apartment buildings and even multi-story rental units are being planned in municipal, as well as suburban areas.
In relation to the general economy, I recently conducted a well-attended financial forum. After an overall economic analysis, I fielded and answered the following questions:
1) Q. Will the current economy slip into a double dip recession?
1) A. Although the nation is not technically experiencing two consecutive negative growth quarters, festering unemployment, stagnant demand, and lack of business expansion have created an ongoing recessionary climate.
2) Q. Will the Eurozone's financial turmoil continue to weigh on America's stock, bond and commodity volatility?
2) A. Since the world's banking systems are internationally intertwined, especially with the U.S. and Europe, only a German-orchestrated bailout of Greece and others in the Eurozone's lower tier will bring a respite to America's volatile financial markets.
3) Q. Is severe inflation on the near-term horizon?
3) A. With the Federal Open Market Committee freezing Fed funds rates well into 2013, monetary inflation is unlikely. However, the inability to restrain runaway spending could weaken interest in America's Treasury debt paper, causing a surge in fiscal interest rates. This would usher in the dreaded specter of stagflation (higher prices without demand growth.)
4) Q. What will it take to get our overall economy moving again?
4) A. Removing the heavy hand of the Environmental Protection Agency, Obamacare, Sarbanes-Oxley, and Frank-Dodd financial regulations from the throats of independent businesses, which have adopted a siege mentality.
5) Q. Will the residential construction and housing markets regain momentum?
5) A. This once leading foundation of America's economic vitality and hands-on employment is dormant for now, with foreclosures representing a leading factor in housing sales, and a rental shift becoming dominant nationwide. Only repair, maintenance, energy conservation and upgrading will add to the once vast housing market's construction activity.
6) Q. What will it take to generate consumer/producer demand to get the U.S.A. back on a dynamic economic growth pattern?
6) A. While exports now comprise more than 10% of America's total gross domestic product of $14.5 trillion, 67% has traditionally come from the consumer sector. With employment down, wages flat, and consumers bent on paring debt, while credit qualification is tougher to get, U.S. GDP growth will largely be dependent on such government gimmicks as unemployment compensation, and temporary payroll tax cutbacks. Also, business/industrial repair, maintenance, and productivity technology will do their part. With no nationwide infrastructure program in sight, only the current expansion of dry land oil and natural gas production holds real growth promise, if the EPA can be restrained.
7) Q. How would you approach the current income tax imbroglio, which seems to be getting more complicated and increasingly ineffective as a means of generating revenues from America's wage earners?
7) A. America's Internal Revenue collection system has been getting progressively worse since its inception in 1913. Instead of providing a fair and balanced approach to universal participation, it has been constantly re-jiggered by Congress, bowing to powerful lobbyists, and broadening loopholes to satisfy special interest groups.
What is required, after the November 6, 2012 general elections, is an up-to-date system that lowers tax rates, eliminates loopholes, and initiates a consumption tax, to encompass the massive underground economy which, together with the 40% of the U.S. population are non-payers of income taxes.
That together, with needed budget cuts, will provide the best opportunity to close the unsustainable budget/deficit gap that currently looks to get worse under present governmental circumstances.
