In Box

Epiphanies from Austan Goolsbee

President Obama's former economic advisor speaks out.

As chairman of the Council of Economic Advisers and a cabinet-level aide to fellow Chicagoan Barack Obama, Austan Goolsbee had a rarefied perch in Washington for an academic trained to write about recessions, not steer the country through one. He couldn't wait to leave. "There was a lot of yelling," Goolsbee says. Now safely back at the University of Chicago, he talks to Foreign Policy about the inside-the-administration fights, tired Republican trickle-down economics, and what he would do if he woke up one day as China's central bank chief.

We had the most successful financial system rescue ever. It didn't end up costing any money. Normally, a financial rescue of that magnitude costs about 5 to 10 percent of GDP, an astoundingly big number. But in the U.S. they paid the money back. That hasn't stopped it from being massively unpopular, and it hasn't prevented the worst recession in our lifetimes for the real economy.

The U.S. is still in a pretty good spot, especially relative to other advanced countries. The aging of our population is not as pronounced as almost anyone else's. We start from a debt-to-GDP ratio that's below most other advanced countries. Our tax and spending levels are pretty low. And we continue to be a highly entrepreneurial culture with a great deal of innovation. It's not to say everything is perfect, but I'm pretty optimistic. Cautious but, medium to long run, heavily optimistic.

The primary reason it's been such hard, slow, tough work to get out of this recession is that we fundamentally can't go back to what we were doing before the recession began. There's 6 million vacant homes now, so we're not going to go back to massive construction rates driving economic growth. In several quarters in the 2000s, if you added up all the private savings of everyone in the United States, it was less than nothing. You can't sustain that as a driver of growth.

You can understand why people are pissed off. The Occupy Wall Street crowd put on the table an issue, which is a pretty glaring one in the data, that hadn't really been on the agenda: income inequality, tax policy, and whether the focus of our policies should only be saving corporations. And if you look at the Romney or Perry economic plans, they're just in the same old trickle-down playbook.

Would I dump the dollar [if I were China's central banker]? I don't know. Look, if you accumulate $2 or $3 trillion of foreign reserves, you're in a tough spot. George Stigler, a Nobel laureate here at the University at Chicago, used to wake up every day and give himself a D. But that made him feel good because he gave everyone else an F. For every criticism of the U.S. economy, whenever people go into a panic, they look around and say, "That's the cleanest shirt I have. So I'm putting it on."

I'm pretty happy not to be an insider anymore. There's just no common ground. I don't know if it's distrust or that the politics is substantially more partisan than the public. But there's no pressure to make a grand bargain on fiscal matters, on growth, on anything. The Republicans were like the East German judge at the Olympics: The president lands a triple flip, but they've already given him a 2.

Joe Ciardiello

In Box

Energy Independence: A Short History

A century and a half of an idea whose time has never come.

It might be the last truly bipartisan policy aim in Washington, and the least plausible one: Every U.S. president since Richard Nixon has pledged allegiance to the goal of "energy independence," even as the United States has remained dependent on imported oil. And as China's appetite for fossil fuels surpasses America's, energy anxiety has gone global -- just in time for another presidential election year.

Edwin L. Drake drills the world's first oil well outside Titusville, Pennsylvania.

In The Coal Question, British economist William Stanley Jevons warns that Britain is in danger of running out of coal, threatening the country's strategic and economic preeminence -- a matter, he writes, of "almost religious importance."

Winston Churchill, then first lord of the admiralty, begins converting Britain's Royal Navy -- the world's largest-from coal to oil, exchanging energy independence for power and speed. Over the next several years, Britain wrestles the oil fields of the Persian Gulf away from a crumbling Ottoman Empire.

Oil exporters Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela form the Organization of the Petroleum Exporting Countries (OPEC).

After taking power in a military coup, Muammar al-Qaddafi starts nationalizing Libya's oil fields -- then the source of 30 percent of Europe's oil imports -- thus beginning Western oil companies' expulsion from the Arab world.

The United States becomes a net oil importer.

Oil production in Texas, the motherland of U.S. crude, begins to decline. "Texas oil fields have been like a reliable old warrior that could rise to the task when needed," Texas Railroad Commission Chairman Byron Tunnell says. "That old warrior can't rise anymore."

"The era of low-cost energy is almost dead," U.S. Commerce Secretary Peter G. Peterson declares. "Popeye is running out of spinach."

April: In a Foreign Affairs article titled "The Oil Crisis: This Time the Wolf Is Here," James E. Akins, who would become U.S. ambassador to Saudi Arabia that fall, warns that "the threat to use oil as a political weapon must be taken seriously."

October: Egypt and Syria launch a surprise attack on Israel, beginning the Yom Kippur War. The United States responds with $2.2 billion in arms and aid to Israel. The following day, OPEC declares a halt to oil shipments to the United States, Western Europe, and Japan. By January 1974, oil prices have more than quadrupled.

November 7: U.S. President Richard Nixon announces "Project Independence," a plan to wean the United States off foreign oil. The dream of American energy independence is born.

The U.S. Congress passes the Energy Policy and Conservation Act, creating the Strategic Petroleum Reserve and imposing the first fuel-efficiency standards for vehicles.

U.S. President Jimmy Carter makes energy independence the central ambition of his presidency, later establishing the Department of Energy, investing billions of dollars in research and development, and installing solar panels at the White House.

An uprising topples Iran's Mohammad Reza Pahlavi and one of the two pillars of U.S. energy supply in the Middle East crumbles, leaving only Saudi Arabia.

U.S. President Ronald Reagan announces his plan to lift price controls on oil and begins disassembling the renewable-energy research programs begun under Carter.

The Exxon Valdez oil tanker runs aground in Alaska's Prince William Sound. Americans' support for offshore drilling plummets and remains low well into the 1990s.

After accusing Kuwait of stealing Iraqi oil with slant-drilling techniques, Saddam Hussein seizes Kuwaiti oil fields. U.S. President George H.W. Bush leads a coalition to oust him.

For the first time since the 1910s, the United States imports more oil than it produces. Deputy Energy Secretary Bill White describes the situation as "the biggest trade problem we have."

Vice President Dick Cheney's energy task force releases its National Energy Policy. "Our increased dependence on foreign oil profoundly illustrates our nation's failure to establish an effective energy policy," the report states, recommending a renewed commitment to domestic oil, coal, natural gas, hydropower, and nuclear power.

Congress passes the Energy Policy Act, including quotas and millions of dollars in subsidies in hopes of nearly doubling U.S. ethanol production by 2012.

Congress passes the Energy Independence and Security Act, which .imposes tougher fuel-efficiency standards on vehicles and orders a whopping 766 percent increase from 2007's targeted biofuel production by 2022. By 2008, ethanol has become a $32 billion business in the United States.

Oil prices hit a record $148 a barrel.

September: At the Republican National Convention, Michael Steele calls on Americans to "reduce our dependency on foreign sources of oil and promote oil and gas production at home. In other words: Drill, baby, drill!"

China's oil imports surpass domestic production for the first time.

Hashing out its new five-year plan, the Chinese government embraces ambitious new targets for reducing China's reliance on imported oil.

A weak economy and more efficient vehicles cause oil imports to fall below half of U.S. consumption for the first time in 13 years.

The International Energy Agency predicts that the European Union will surpass the United States as an energy importer by 2015.

U.S. shale gas production reaches 5 trillion cubic feet, five times its 1990 level, reigniting hopes for homegrown energy.

Thanks to John Deutch of the Massachusetts Institute of Technology and Michael Graetz of Columbia University.