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WNDI 2008 1

Spending DA Aff

Spending DA Aff
Spending DA Aff.........................................................................................................................................................1
Spending DA Aff.............................................................................................................................1
Non-Unique.................................................................................................................................................................2
Non-Unique.....................................................................................................................................2
Non-Unique – A2: GDP..............................................................................................................................................3
Non-Unique – A2: GDP.................................................................................................................3
Non-Unique – Consumer Confidence.........................................................................................................................4
Non-Unique – Consumer Confidence...........................................................................................4
No Link – President....................................................................................................................................................5
No Link – President.......................................................................................................................5
Link Turn (Competitiveness)......................................................................................................................................6
Link Turn (Competitiveness)........................................................................................................6
Link Turn (Oil)............................................................................................................................................................7
Link Turn (Oil)...............................................................................................................................7
Link Turn (Oil) 1/2......................................................................................................................................................8
Link Turn (Oil) 1/2.........................................................................................................................8
Link Turn (Oil) 2/2......................................................................................................................................................9
Link Turn (Oil) 2/2.........................................................................................................................9
Link Turn (Ethanol)..................................................................................................................................................10
Link Turn (Ethanol).....................................................................................................................10
No Impact – Resilience.............................................................................................................................................11
No Impact – Resilience.................................................................................................................11
No Impact – Resilience.............................................................................................................................................12
No Impact – Resilience................................................................................................................12
No Impact – China....................................................................................................................................................13
No Impact – China.......................................................................................................................13
No Impact – Competitiveness...................................................................................................................................14
No Impact – Competitiveness.....................................................................................................14
No Impact – Competitiveness...................................................................................................................................15
No Impact – Competitiveness.....................................................................................................15
WNDI 2008 2
Spending DA Aff

Non-Unique
Recession is inevitable – credit crisis, auto industry, consumer confidence, employment
Joseph Brusuelas, Chief Economist, Merk Investments, July 11, 2008, An Economy in Trouble
Over the past few weeks many notable analysts have made the case that the economy is in the process of recovery.
The market has celebrated the wonder of the “resilient consumer.” Given the still fragile state of the economy we think that this is a
bit overblown. A cold-eyed, hard-nosed analysis of the true condition of all things financial provides us
with a very different assessment of the economy. But, with a major week of fundamental data and the onset of earnings
season for financials upon us we thought it pertinent to put a few ideas to rest. First, the credit crisis has yet to run its
course. A genuine credit crisis is comprised of two components: a liquidity crisis and insolvency crises. With already $400.00 billion
in global write offs within the financial sector alone one might be tempted to declare the credit crises over. Yet, the problems on the
balance sheets of financials will continue. Write-downs and the process of de-leveraging have yet to be finalized. We believe that there
are $75-$100 billion in write downs left in the US alone before we reach a conclusion to the liquidity portion of the crises. This will
continue to depress whatever appetite for risk taking in equity and credit markets remains. The Fed did not extend its primary dealer
credit facility well into 2009 by accident. Moreover, we have only begun to embark on the insolvency portion of the
economic tragedy unfolding before our eyes. Too many market players are operating on the unspoken assumption that the
fall of Bear Stearns and the near miss at Lehman have signaled that the end of the troubles are at hand. Unfortunately, this is not the
case. The crisis that has primarily engulfed Wall Street is beginning to spillover onto Main Street. Ford and GM will both be
candidates for mergers, bankruptcies or bailouts in 2009. It is quite clear to anyone that care to look that Fannie Mae
and Freddie Mac will have to be bailed out by the Federal Government. Pending legislation in Congress regarding the end of private fee
for service, if it is enacted, will put at least one major player in the healthcare sector and one minor actor at serious risk of insolvency
early next year. And do not forget the 200-250 small and regional banks that the Fed has warned us will eventually fail. Even such
stalwarts as the gaming sector, which has been traditionally impervious to systemic economic slowdowns is going to see a spree of
consolidations and perhaps a few insolvencies on the back of too much debt and a sharp reduction in demand from consumers who have
seen their discretionary income evaporate. Second, the consumer is no longer resilient but in fairly significant
trouble. A well -timed and quickly implemented fiscal stimulus program is masking the true condition of the
consumer. Pre-fiscal stimulus, the trend in real personal consumption was absolutely flat. Once the positive aspects of the stimulus
withers away the prevailing trend in real consumption will reassert itself and we shall be back to where we were in the first quarter of the
year. The market has observed six consecutive months of contraction in non-farm payrolls. Growth in the once
vibrant service sector has collapsed to near zero growth over the past three months. The major factors keeping the labor sector
from collapsing appears to be the very questionable birth-death model at the Bureau of Labor Statistics and the aforementioned
healthcare and hospitality sectors. Over the next few months the modeling at the BLS will catch up with reality and the
healthcare/leisure sector will experience outsized contraction based on current economic conditions and trends. The decline in real
income will put additional pressure on an already stressed consumer and set the stage for the final
capitulation. Finally, we will see a series of revisions to recent economic data, including GDP that may change current perceptions
of the economy. We expect that the downward revisions will confirm that we are in a mild recession. More
importantly, we anticipate that when we get to the final quarter of 2008 will see another downturn in economic
activity. Since 2007 my forecast for the economy has been “W” (no pun intended) shaped recession. We saw the first trough in late
February and early March of 2008. We are currently at the middle apex of the “W” and expect to see growth begin to decline during the
early portion of Q4’08. The final trough in our double dip scenario should occur in the second quarter of next year.
The sub trend 2.1% rate of growth that we expect to see in Q2’08 is a function of Washington priming the pump and the a vibrant
external sector. Once the stimulus from the Federal government begins to fade and the impact of the searing increase in the cost of
energy and commodities can be assessed on a domestic and global basis, the last vestige of support for the economy, net
exports will fade to away and the US economy will see its first major recession since the early 1980’s.

Recession is either inevitable or impossible


CNN interview with Fareed Zakaria, world affairs analyst, July 11, 2008, Zakaria: Perfect storm hitting U.S.
economy
NEW YORK (CNN) -- Between the mortgage crisis, record high oil prices and a lackluster stock market,
Americans are not exactly confident about the economy. CNN spoke with world affairs analyst and author Fareed
Zakaria about his view of the situation. CNN: How bad is the U.S. economy right now? Zakaria: It almost looks like a perfect
storm. We have a collapsing housing market, weak consumer spending and a credit crisis that has kept
banks reluctant to extend credit easily. Plus, food and fuel prices are soaring. It's actually a sign of the
strength of the American and global economy that we're not in a big global recession given all of this. But it's
not going to get better fast. CNN: So, we're not past the worst yet? Zakaria: Look I'm not a trained economist but I had three of the
best on the show this week -- Larry Summers (Treasury Secretary for Bill Clinton) Jeff Sachs (Director of UN Millennium Project),
and Paul Krugman (op-ed columnist on economy for The New York Times). And they all agreed that it was unlikely that we
had worked through most of the problems in the economy. They felt we seemed to have avoided the worst of the
financial crisis but that now the real economy was beginning to show the signs of pain -- housing was going to
keep declining, the consumer would scale back and companies would cut their workforces.
WNDI 2008 3
Spending DA Aff

Non-Unique – A2: GDP


Recession is inevitable – the best data proves that GDP growth will collapse
Caroline Baum, Bloomberg News Columnist, July 13, 2008, APP.com, Caroline Baum: Its all over but the dating
for U.S. recession
With no prospect for a near-term turnaround in the labor market, the real question becomes, at what point do
the employment declines gain the critical mass to warrant the official recession designation? "Depth
level" I posed the question to Robert Hall, chairman of the BCDC, in an e-mail this week. After emphasizing
that he was "speaking as an individual member of the committee and not as chair," he said the committee
"may reach the question of what depth level constitutes a recession, but we are not there yet." The
committee may not be there yet, but the economy most likely is. All four of the BCDC's coincident
indicators peaked late last year or early this year. The trends in the components aren't likely to reverse
anytime soon. So as Hall said, it's only a matter of determining what "depth level" will suffice to make the
recession official. What about real gross domestic product, which is still growing? The BCDC uses four
monthly indicators because they are a) more timely than quarterly GDP and b) a proxy for it. Real GDP
rose 0.6 percent in the fourth quarter and 1 percent in the first. The meager fourth-quarter increase could
turn to mush as early as July 31, when the Bureau of Economic Analysis releases its annual benchmark
revisions to the National Income and Product Accounts for the last three years. A decline in GDP in the
fourth quarter wouldn't be the depth charge the BCDC needs to designate an official cycle peak. That comes
with a long lag, sometimes after the recession has ended. It would just be a confirmation for those of us
who, to paraphrase economist Robert Solow, see a recession everywhere except in the GDP data.
WNDI 2008 4
Spending DA Aff

Non-Unique – Consumer Confidence


Consumer confidence going from bad to worse – prefer predictive evidence
Peter Charalambous, Investment Markets UK, July 14, 2008, US consumer sentiment at a 28-year low,
http://www.investmentmarkets.co.uk/20080714-2260.html
US consumer confidence is at the lowest level in 28 years as spending has slowed in a period where
credit availability and the affects of the federal tax rebates are reducing. Consumers are still
concerned about rising energy and food prices as well as job layoffs and the future of the economy still
remains bleak. The pessimism in the economy has continued to threaten consumer spending and the
domestic market, which is the largest part of the US economy. With record high petrol prices and the labour
market weakened by continued cutbacks, as well as a troubled housing market, inflation is now teetering at
3.4 percent. Future consumer confidence is likely to continue to be weak as consumers polled by
Reuters/University of Michigan said they expect an inflation rate of 5.3 percent over the next 12 months,
which is a 0.2 percent increase from the previous month.

Consumer confidence will continue to fall


Bloomberg News, July 11, 2008, U.S. consumers still skeptical about economy
Confidence among Americans remained close to the lowest level since 1980 this month, threatening to
cut consumer spending and send the economy into a deeper slump. The Reuters/University of Michigan
preliminary index of consumer sentiment registered 56.6, higher than forecast and little changed from a June
reading of 56.4 that was the lowest since May 1980. Government reports showed the U.S. trade deficit
unexpectedly narrowed in May and prices of imported goods rose more than forecast in June. The
confidence reading lends support to forecasts that consumer spending and the U.S. economic expansion will
slow after the impact of federal tax rebates fades. Consumer spending will increase just 0.2 percent next
quarter, the smallest gain since 1991, according to a Bloomberg News survey of economists completed this
week. "The fundamental pressures are still building on the consumer," Scott Anderson, senior economist
at Wells Fargo & Co. in Minneapolis, said in an interview with Bloomberg Television. "We expect much
weaker spending and confidence as we move into the fourth quarter of this year."
WNDI 2008 5
Spending DA Aff

No Link – President
Presidential policy-decisions don’t effect the economy
Daniel Gross, Moneybox columnist for Slate and the business columnist for Newsweek, July 13, 2008, Neither
Obama nor McCain can cure ailing economy
Does the president really have any effect on the short-term direction and performance of the economy?
The answer is no, but with two important "buts." Over the past 219 years, the U.S. economy has expanded under all types
of presidents, Democratic and Republican, activist and somnolent. But there have certainly been notable policies that inflicted short-term
damage, such as Thomas Jefferson's ill-conceived embargo on trade with Britain in 1807 and Ulysses S. Grant's decision to place the
United States back on the gold standard, which contributed to a banking panic that in turn led to a recession that lasted for nearly all of
Grant's second term. Between 1929 and 1933, as a stock-market crash and credit crunch metastasized into the Depression, Herbert
Hoover adopted a hands-off approach that exiled his party from the White House for a generation. But today, while the president
of the United States may be the most powerful person in the world, "his influence on the short-term macro-economy is
generally overestimated by voters," says Thomas E. Mann, senior fellow at the Brookings Institution. Partisans might think the
economy got off the mat the minute Ronald Reagan was inaugurated in 1981 or when Bill Clinton took the oath in January 1993. But the
factors that influence the business cycle are so myriad, powerful and unpredictable that not even an executive as muscular as California
Gov. Arnold Schwarzenegger could bend them to his will. The megatrends that made the 1990s a long summer of economic love – the
end of the cold war, the deflationary influence of an emerging China, the Internet – would have happened with or without Rubinomics.
And most of the factors now making life miserable – commodity inflation, a housing bubble and a weak dollar engineered by the Federal
Reserve's promiscuous policies, the demand-driven surge in oil – would likely have materialized had John Kerry won in 2004. The
maturation of the Federal Reserve into a powerful, independent agency has further stolen the thunder from the presidency in short-term
economic affairs. By cutting interest rates and offering banks access to liquidity, Federal Reserve Chairman Ben Bernanke has
done more to stimulate the economy in the past year than Mr. Bush or Congress. There's a third reason the
identity of the next president won't matter all that much to the economy in 2009. The past 16 years of experience –
not to mention this year's campaign platforms – prove that Democrats and Republicans diverge sharply on fiscal and economic policy.
But on some of the big-picture items that matter most to short-term performance, a consensus has emerged over the years.
Modern Republicans have learned their lesson from Hoover and have embraced the necessity for short-term fiscal stimulus when the
economy slows. "We're all Keynesians now," as Richard Nixon said. Modern Democrats have also learned their lesson from Hoover,
who signed the disastrous Smoot-Hawley Tariff into effect in 1930. Twenty-first-century Democrats generally embrace the utility of free
trade, even during economic downturns. This isn't to say that the identity of the president in 2009 won't matter. Presidents tend to have
the most success enacting new policies in the first year in office. And the next president will appoint a Federal Reserve chairman early in
his term. But – and this is the first but – the macroeconomic impacts of early-term policies are often evident only
after several years. Harvard economist Benjamin Friedman notes that Nixon's imposition of wage and price controls in August
1971 helped smooth his re-election in 1972. "But these controls became a substitute for serious anti-inflationary policy, and were the
beginning of a set of policies that led to really severe inflation." So here's some straight talk about change we can believe in. Most of the
promises that Mr. Obama and Mr. McCain are making about the economy will founder on the shoals of a Congress
unwilling to be a rubber stamp, organized industry opposition, unanticipated events, budget realities and
changes in the macroeconomic climate.
WNDI 2008 6
Spending DA Aff

Link Turn (Competitiveness)


Competitiveness is shot unless the US develops alternative energy
Lloyd V. Stover, Environmental Scienctist, July 12, 2008, A New Kind of Recession, Waldo County Opinions
We are witnessing a dramatic shift in world influence. The energy-producing nations — the Middle
East, Nigeria, Russia and Venezuela, may choose to hold oil and other commodities, instead of the
declining U.S. dollar. America needs to dramatically improve energy efficiency and develop renewable
sources. The price of oil will stay up forever because it goes into making so many things the modern world
depends on: Petroleum, food, plastics, fabrics. And food prices affect everyone around the world. Alternative
energies are an increasing part of the world’s energy future, and America is not a world leader.
WNDI 2008 7
Spending DA Aff

Link Turn (Oil)


Alternative energy solves oil shocks, which kill the economy
Amy Jaffe, Baker Institute, congressional testimony on the roots of high oil prices, July 10, 2008, Cherry Creek
News
Alternative energy supplies provide ready substitutes if the price of oil rises too extremely and can
shield the economy from the negative impact from disruption of any one fuel source. It has been shown
that the lower a country’s energy consumption to gross domestic product (GDP) ratio or the shorter the
period that oil prices will remain higher, the lower the cost of the tradeoff between inflation and GDP loss.
New technologies exist on the horizon that could allow more gains in energy efficiency. Examples include
micro-turbines for distributed power markets, improved vehicle technologies, including plug-in hybrid
automobile technology, household solar technologies, among others. Electricity in the United States is
generated without recourse to oil-based fuels, providing a unique opportunity for creative avenues for
alternative energy policy that would promote the use of electricity in the transportation sector.
WNDI 2008 8
Spending DA Aff

Link Turn (Oil) 1/2


Oil shocks mean economic collapse is inevitable – we must develop alternatives now
Ian Sample, Science correspondent for The Guardian, June 27, 2008, Final Warning
Expensive fuel at the pumps is just the start. These battles over the price of oil could be the harbinger of something even scarier. There is
a growing realisation that we are teetering on the edge of an economic catastrophe which could be triggered
next time there is a glitch in the world's oil supply. A number of converging forces are making such an
event more likely than ever before. First, there is the spectacular rise in global oil consumption, which,
according to the International Energy Agency (IEA) now stands at 87 million barrels of crude (about 10 billion litres) a day. Most
geologists now accept we have reached, or will imminently reach, peak oil. Some fields in the US and the North Sea have been pumped
dry and production is becoming increasingly concentrated within fewer countries. Add a boost from speculators betting that things will
get even worse, chicanery by the Organisation of Petroleum Exporting Countries (OPEC) cartel which over the past two years has added
Angola and Ecuador to its ranks to mask the decline in production of its existing members, and it's not hard to see why prices have been
forced ever upwards. But price conceals the much more complex mess we're in. In the past, it has usually been possible to ride out any
disruption to world oil flows - whether from accidents or hostile acts - by pumping more oil from the ground. That spare capacity has
now all but vanished, as oil producers cash in on soaring prices by extracting as much of the stuff as they can. "There is absolutely no
slack in the system any more," says Gal Luft, executive director of the Institute for the Analysis of Global Security, a Washington DC-
based think tank specialising in energy security. It is this lack of wriggle-room that has brought us to the brink. In the days when oil
producers had more leeway, they could make up for a disruption somewhere in the system by quickly raising production by around 3
million barrels a day, says Nick Butler, head of the Cambridge Centre for Energy Studies, part of the University of Cambridge's Judge
Business School. That crucial reserve capacity has now fallen below the daily output of some producers - meaning that if the
taps were turned off in any one of a number of unstable oil-supplying nations, such as Nigeria, Iraq, Iran or Angola, the impact
would be felt almost immediately. This has left the oil market so fragile that a few well-placed explosives, an
energy-sapping cold winter or an unusually intense hurricane season could send shock waves across the globe. The
potential consequences are so serious that governments are drawing up emergency plans to cope should the worst happen. According to
one analyst who took part in a simulation of just such a crisis, the situation most experts fear is what they call a "psychological
avalanche". Here's what happens. A small, distant country one day finds it can no longer import enough oil because of a spike in
prices or problems with local supply. The news media whip this up into a story suggesting an oil shock is on the way, and the resulting
panic buying by the public degenerates into a global grab for oil. Most industrialised countries keep an emergency reserve as a first line
of defence, but in the face of worldwide panic buying this may not be enough. Countries in which the oil runs out face transport
meltdown, wreaking havoc with international trade and domestic necessities such as food distribution, emergency services and daily
commerce. Without oil everything stops. The roots of our oil addiction can be traced back to the end of the 19th century, when
petroleum began to be pumped from wells across America. It wasn't long before it become obvious what a great transport fuel it could
provide. Oil-based fuels paved the way for intensive farming and extensive road networks; they drove the influx of populations into
cities, drove growth in shipping and eventually made mass air travel possible. "Oil has shaped our civilisation. Without crude oil you'd
have no cars, no shipping, no planes," says Gideon Samid, head of the Innovation Appraisal Group (IAG) at Case Western Reserve
University in Ohio. And it's not just about fuels. A giant chemical industry relies on oil as its feedstock, and without it many of the
products we now take for granted would vanish. "You'd see no plastics, no bags, no toys, no cases on TVs, computers or radios. It's
absolutely everywhere," says Samid. "Much of the economic expansion and growth of the human population in
the 20th century is directly tied to the availability of large amounts of cheap oil," says Cutler Cleveland,
director of the Center for Energy and Environmental Studies at Boston University. "There isn't a single good or service consumed on the
planet, except in rural economies, that doesn't have oil embedded in it. Oil is the lifeblood of the global economy." The secret of oil's
success is its portability and extraordinarily high energy density. One barrel of oil contains the energy equivalent of 46 US gallons of
gasoline; burn it and it will release more than 6 billion joules of heat energy, equivalent to the amount of energy expended by five
agricultural labourers working 12-hour days non-stop for a year. The vast majority of oil is consumed by transport. In the US, that sector
accounts for nearly 70 per cent of the 20.7 million barrels the country gets through each day. . More than half of the world's oil comes
from seven countries, the leading supplier being Saudi Arabia, which produces more than 10 million barrels a day. Then come Russia,
the US, Iran, China, Mexico and Canada. Twenty years ago, there were 15 oilfields able to supply 1 million barrels a day. Now, there are
only four. The largest is the Ghawar field in Saudi Arabia. The IEA, which advises 27 countries on oil emergencies, requires its
members to hold at least 90 days' worth of fuel, which can be pooled and released onto the market if a crisis looms. The system last
swung into action in 2005 when hurricane Katrina caused the shutdown of more than 23 per cent of the US's oil production capacity. A
few days after Katrina struck, the IEA ordered the release of 2 million barrels a day from reserve stocks for a month, the first time
reserves had been released since the Gulf war in 1991. About half the world's oil is distributed by tankers mainly plying a handful of
key routes across the oceans. The rest goes through an extensive network of pipelines that can carry different grades of crude and
synthetic compounds, such as lubricants. The bewildering complex of pipelines - extending 90,000 kilometres in the US alone - crosses
continents and dips under oceans. The pipelines are often above ground and vulnerable to accidental damage or attacks by saboteurs.
When working, however, they provide an extremely efficient way of transporting oil. A pipeline that pumps a relatively modest 150,000
barrels per day delivers the equivalent of 750 oil tanker truck loads or one delivery every 2 minutes, day and night. Even if a pipeline is
damaged, it can usually be quickly repaired. Valves at intervals along the pipe can isolate the leak while the damaged section is replaced.
Disruption can still be costly. A report in 2005 by a US House of Representatives subcommittee on terrorism reported that sabotage to
oil pipelines in Iraq had cost the country more than $10 billion in lost revenues, even though protection had been a high priority for the
coalition troops since they invaded two years before. The report suggested that groups hostile to the US and its allies were becoming
increasingly expert at mounting these attacks. Choke points Even outside a conflict zone, accidents can cause serious
disruption. Last year, the IEA was on standby to release reserves after an explosion in Minnesota shut down part of the 5000-
kilometre Enbridge pipeline, which pumps 1.9 million barrels of crude a day from Canada to the US Midwest. This single incident
<CONTINUED>
WNDI 2008 9
Spending DA Aff

Link Turn (Oil) 2/2


<CONTINUED>
halted one-fifth of US oil imports for days. Oil deliveries by sea are vulnerable too. A fleet of 4000 tankers plying six main
routes delivers more than 43 million barrels of oil every day. Many of these routes pass through narrow "choke points", and if any of
these were to become impassable, even temporarily, the effect on oil supplies could be dramatic. For instance, more than 16 million
barrels of oil a day are shipped through the Strait of Hormuz, at the mouth of the Persian Gulf, taking oil from Saudi Arabia, Iran, Iraq,
Kuwait, Qatar and the United Arab Emirates to the US, western Europe and Asia. At its narrowest point, the strait is only 33 kilometres
wide. If necessary, some of Saudi Arabia's exports could be diverted through the 1200-kilometre East-West pipeline to the Red Sea, but
its maximum capacity is only 5 million barrels a day, half of which is already taken up. Between 1984 and 1987, during the Iran-Iraq
war, both countries attacked tankers in the Strait of Hormuz, causing shipping to drop by 25 per cent. In 2003, the Bush administration
claimed it had prevented further attacks on shipping in the strait. Another pinch point occurs in the Strait of Malacca, which narrows to
just 2.7 kilometres between Sumatra and Singapore. Tankers from the Persian Gulf and west Africa transport some 15 million barrels a
day through the strait en route to Japan, China and other Pacific destinations. A report by Luft claims that some tankers have been
hijacked here by would-be terrorists whose initial aim has been simply to learn how to operate them. In 2003 a small chemical tanker
called Dewi Madrim was taken over by 10 armed men, who sailed it through the strait before leaving with equipment and technical
documents. One scenario being suggested is that hijackers might commandeer a liquid natural gas tanker plying one of these shipping
routes, load it with explosives and use it to ram an oil tanker. If this floating bomb produced a burning oil slick, it could render the
passage impassable for months, tipping the global economy into crisis as alternative routes would fail to make up the lost supplies.
Another key element in the global oil infrastructure is Abqaiq, an enormous processing facility in Saudi Arabia, which removes sulphur
from two-thirds of the country's crude. The CIA estimates that seven months after a large-scale attack, output would still be only 40 per
cent of its full capacity. More than half the oil from Abqaiq is pumped to the largest offshore oil terminal in the world, Ras Tanura on
the Persian Gulf, which handles one-tenth of the world's oil. This makes it a prime target for attack, and the site is as heavily defended as
a military base. "If you have a facility like this and a plane crashed into it, or terrorists get in and somehow succeed in blowing it up,
then you have a very, very significant disruption on your hands. That is what analysts see as a doomsday scenario," Lufts says. Reuters
reported that one planned attack on the terminal was thwarted in 2006. Saudi oil production is particularly vulnerable because it is
concentrated in a few massive production and distribution sites. "If one or two of these facilities goes down, then the entire system goes
down," says Luft. So what would the impact be if oil supplies choked? In 2005, a group of current and former US government and
national security officials were asked to address this in a live role-play exercise. Playing the part of the national security adviser was
Robert Gates, who the following year became Secretary of Defense. The scenarios that unfolded were developed with officials from the
Shell oil company in the Netherlands, a former US presidential counter-terrorism adviser and industry analysts. The simulation kicked
off with an upsurge of political violence in Nigeria, the fifth-largest supplier of oil to the US. In the ensuing turmoil 600,000 barrels of
oil production a day were lost from the Niger delta. The violence coincided with the start of a cold winter in the northern hemisphere,
which increased demand by 700,000 barrels a day. Together, these events boosted the price of a barrel of oil from $58 to $82; a
proportional rise today would push the price beyond $195. Events began to gather pace when, a month later, the simulation threw in an
attack on the Haradh natural-gas processing plant in Saudi Arabia, which forced the country to cut 250,000 barrels per day from its
exports - equivalent to the oil consumed every day in Switzerland - to meet domestic needs. Next, news arrived of an attempt to ram a
hijacked supertanker into another vessel moored at a jetty at Ras Tanura. This was closely followed by a similar attack at the oil port of
Valdez in Alaska, as well as a ground attack which set fuel depots alight. With the world oil shortfall now at 3.4 million barrels per day,
the price per barrel had shot up to $123. Against the recent peak price of $139, that rise would take the cost per barrel to $295. The
turmoil leads to an aggressive crackdown on anti-western groups and their sympathisers, which temporarily quells further attacks. Then,
six months into the simulation, a terrorist campaign is launched against foreign workers in Saudi Arabia, killing 200 and wounding 250
within 48 hours. Evacuation of foreign workers follows. Though oil production continues unchecked, this loss of expertise leaves Saudi
Arabia unable to meet future demand and with no spare capacity. Fears that this could lead to shortages in the future bring speculators
into the market, and the price per barrel rises to $161. At the end of the simulation, global production has fallen by 3.5 million barrels a
day, or 4 per cent of world oil supplies. One of the participants, Jim Woolsey, a former head of the CIA, described the scenarios as
"relatively mild compared to what is possible", yet this proved enough to almost triple the price of a barrel of crude. The key conclusion
being drawn from this scenario is how reliant the global oil market is on Saudi Arabia's ability to ramp up production on demand. If this
extra oil is not available, the price rockets. Saudi Arabia's recent reluctance to increase production and the ensuing price rises in today's
real-life oil market amply bear out this prediction. So where does this leave us at a time when global oil production is approaching the
point when it stops growing and starts to decline? Most industry experts, including geoscientists and economists, who were polled by
Samid in 2007 said that peak production will occur by 2010. This contrasted with a similar survey conducted two years
earlier, in which respondents were split, with many of the economists opting for a later date. "Now, a real consensus is emerging," says
Samid. This tells us that we will have to start making serious attempts to wean ourselves off oil, and fast. It will
be no easy task. "It's hardly conceivable that the world could function without oil," says Didier Houssin, director of oil markets and
emergency preparedness at the IEA. Finding a replacement fuel for transport is the biggest challenge. So far all the
alternatives have hit the skids. For example, hydrogen, which could potentially replace oil as a green fuel if made using renewable
sources of energy, has storage and distribution problems. While biofuels, which could be an easier replacement for fossil fuels, require
feedstocks that compete with food crops for water and agricultural land. "To get these alternatives close to what oil can do, you have to
invest a lot of money," says Cleveland, something most governments and energy companies have done reluctantly, and at pathetically
low levels. "These aren't insurmountable problems, but they suggest the transition has some formidable challenges," he adds. One way
or another oil will become more scarce, even more costly and will always have the disadvantage of generating carbon dioxide when it's
burned. However hard it may be, the sooner we make the break, the better.
WNDI 2008 10
Spending DA Aff

Link Turn (Ethanol)


Ethanol is key to the economy because it saves billions a year
Robert Dinneen, President Renewable Fuels Association, July 16, 2002, Federal Document Clearing House
Congressional Testimony
Responding to the need for increased domestic energy resources, reduced air pollution from motor vehicles
and rural economic stimulus, the Congress has consistently supported tax incentives to encourage the
increased production and use of fuel ethanol. Today, refiners and gasoline marketers using 10% ethanol
blends pay 13 per gallon in excise taxes, a 5.3 per gallon reduction from the tax paid on straight gasoline. The
tax incentive is reduced to 5.2 per gallon in 2003 and 5.1 per gallon in 2005. The federal ethanol program
has been an unmitigated success. From just 175 million gallons in 1980, the industry has increased more
than ten-fold to more than 2 billion gallons today. As a result, farmers across the country have received
higher prices for their commodities, more than 200,000 jobs have been created in rural America, the
U.S. has reduced its oil imports, and most importantly, Americans are breathing cleaner air. Taxpayers
also benefit because reduced farm program costs and increased income tax revenue attributable to the
federal ethanol program provide a net savings to the U.S. Treasury of $3.6 billion a year. Indeed, for
every dollar invested by the federal government to stimulate ethanol production and use,
approximately $6 is returned to the treasury in tax revenue and savings from reduced government outlays.

Ethanol adds millions of dollars and thousands of jobs to the economy


Robert Dinneen, President Renewable Fuels Association, July 16, 2002, Federal Document Clearing House
Congressional Testimony
Economic Benefits: The processing of grains for ethanol production provides an important value added
market for farmers, helping to raise the value of commodities they produce. As the third largest use of
corn behind feed and exports, ethanol production utilizes nearly seven percent of the U.S. corn crop, or
over 700 million bushels of corn, adding $4.5 billion in farm revenue annually. The U.S. Department of
Agriculture (USDA) has determined that ethanol production adds 25 - 30 to every bushel of corn. The
production of ethanol has sparked new capital investment and economic development in rural
communities across America. There has not been an oil refinery built in this country in 25 years. But
during that time 63 ethanol refineries have been built, stimulating rural economies and creating jobs.
USDA estimates that a 100 million gallon ethanol production facility will create 2,250 local jobs for a single
community. Industry growth offers enormous potential for overall economic growth and additional
employment in local communities throughout the country. According to a Midwestern Governors'
Conference report, the economic impact of the demand for ethanol: Adds $4.5 billion to farm revenue
annually . Boosts total employment by 195,200 jobs . Increases state tax receipts by $450 million -
Improves the U-S- balance of trade by $2 billion - Results in $3-6 billion in net savings to the federal
Treasury.
WNDI 2008 11
Spending DA Aff

No Impact – Resilience
The capital market system and global economy is resilient
Gerd Häusler, October 7, 2005, Counsellor and Director of the IMF's International Capital Markets Department,
El Financiero (Mexico), Why the Global Financial System Is More Resilient
There are a number of reasons why we should be optimistic about continued international financial
stability. First, capital inflows into the United States—most of them private—continue to finance the U.S.
current account, and to support the U.S. dollar. These flows carry on unabated because of the country's
favorable growth and interest rates, as well as its deep and liquid capital markets. They are unlikely to
change direction abruptly since no other country or region enjoys the combination of robust growth and
deep financial markets that the U.S. offers. Second, through countervailing forces, financial markets have a
way of self-correcting. Institutional investors are unlikely to sit on the fence for long and will become less
risk-averse. They cannot afford to stay in risk-free but low-yielding cash positions, and need to remain
fully invested by searching for "undervalued" assets. There are additional market forces that make panic
and contagion less likely. One is the growing importance of strategic institutional investors, like pension
funds and life insurance companies, who take the long view, and are less likely to succumb to herd
behavior. Another, is the increasing sophistication of institutional investors, who are able to differentiate
between country- or company-specific versus systemic concerns. All in all, their diversity has increased
over the years and so has their investment behavior. We should welcome this contribution to financial
stability. All those factors that have strengthened the financial system over the past few years now
provide a welcome cushion if the global financial system were to come under stress. They would allow
market participants and policy makers time to adjust and, therefore, to avoid full-blown crises. The
much-strengthened balance sheets of the financial, corporate and household sectors can serve as one such
shock absorber for financial systems against severe market corrections. The wide dispersal of financial
risk from the banking to nonbanking sectors, improved risk management, and the enhanced
transparency and disclosure in financial markets also work in the same direction. As for emerging
markets, fundamentals have strengthened as many countries have shown solid economic performance.
They have also been building cushions against possible adverse developments, by accumulating reserves,
undertaking early financing of external needs, and improving debt structures. Institutional investors like
pension funds are increasingly making strategic allocations to emerging bond markets, and international
investors are taking an interest in local currency bonds. This should help deepen national markets and
reduce emerging market vulnerability to currency risk.

( ) Economic decline doesn’t cause war


Morris Miller, Winter 2000, Interdisciplinary Science Reviews, “Poverty as a cause of wars?” V. 25, Iss. 4, p pq
The question may be reformulated. Do wars spring from a popular reaction to a sudden economic crisis that
exacerbates poverty and growing disparities in wealth and incomes? Perhaps one could argue, as some scholars do, that it is some dramatic event or
sequence of such events leading to the exacerbation of poverty that, in turn, leads to this deplorable denouement. This exogenous factor might act as a
catalyst for a violent reaction on the part of the people or on the part of the political leadership who would then possibly be tempted to seek a diversion by
According to a study undertaken by
finding or, if need be, fabricating an enemy and setting in train the process leading to war.
Minxin Pei and Ariel Adesnik of the Carnegie Endowment for International Peace, there would not appear
to be any merit in this hypothesis. After studying ninety-three episodes of economic crisis in twenty-two
countries in Latin America and Asia in the years since the Second World War they concluded that:19 Much
of the conventional wisdom about the political impact of economic crises may be wrong ... The severity
of economic crisis - as measured in terms of inflation and negative growth - bore no relationship to the
collapse of regimes ... (or, in democratic states, rarely) to an outbreak of violence ... In the cases of
dictatorships and semidemocracies, the ruling elites responded to crises by increasing repression (thereby
using one form of violence to abort another).
WNDI 2008 12
Spending DA Aff

No Impact – Resilience
There’s no impact to recession—the US economy will bounce back
W. Michael Cox, senior vice president and chief economist at the Federal Reserve Bank of Dallas, Investor's
Business Daily, 1-9-02
Since 1960, the average recession lasted 11 months, with declines of 2.1 percentage points in total output and 1.7% in employment. The previous downturn,
an eight-month pause from August 1990 to March 1991, saw just a 1.5% slump in economic activity and a 1.1% drop in the number of jobs. Before 1940,
only one in seven recessions was over by 11 months. A third of them hung on for at least 23 months. Between 1887 and 1950, recessions meant an average
decline of 13% in industrial production. Since 1960, the toll has been reduced to 7%. Shorter, milder recessions arise from a shift away from the
dominance of boom-to-bust industries, such as farming and manufacturing. The
economy has diversified, with volatile sectors
not only being smaller slices of the pie, but also offset by more stable pieces, such as trade and services.
Recessions are part of the system. Periods of economic slowdown serve a purpose in a capitalist economy.
The pauses allow for time to correct excesses - rising inflation, bloated inventories, excess capacity, supply
bottlenecks and misallocation of resources. Boom times hide the excesses, and they're wrung out during
the down months. In recession an economy reorganizes itself, reallocating resources to emerge more
efficient and productive. Layoffs are traumatic, but labor and other resources are freed for eventual use in
the next wave of enterprises. Thousands of dot-com companies may have gone belly up, but we didn't lose
their know-how. The technology and human resources are still here. Recession doesn't equal regression.
We can reuse what we learned. Recessions are to some extent self-correcting. Now that a slump is here, the
economy won't continue to spiral downward. Once down, it won't stay down. In an economy where markets provide continual
feedback, behavior and expectations can change quickly. As demand falters, companies cut costs and reduce inventories. Prices adjust downward.
Consumers react by buying more, reviving demand. Policy responses are part of the cure. The Federal Reserve moved aggressively in 2001 to lower
interest rates. Credit is now cheaper than any time in the past 40 years. Looking ahead, the economy maintains considerable strength. Inflation remains tame
at less than 2%. Real personal income continued to grow in 2001, so consumers have more money to spend. America still sits on a mother lode of new
technologies - from electronics to medicine. The spirit of enterprise never lies dormant, not even in recession. Thus, the U.S. economy already has the
makings of the next boom.

US Econ is resilient-9/11, Katrina, oil prices, and tech balloon prove


Christian Science Monitor “US economy chugs ahead despite auto and housing slumps” 12/11/2006
The economy's resilience has been a theme of several years' standing - one that predates the 9/11
attacks. The US output of goods and services has survived the damage of hurricanes Katrina and Rita,
a run-up in oil prices, and the bursting of the high-tech balloon in early 2001. One reason for its
capacity to take hits is its growing diversity. Indeed, last month's new jobs came in health and financial
services, travel, government hiring, and professional services - all helping to offset a struggling
manufacturing sector. Even in manufacturing, the picture is not as bleak as it could be, in part because
vigorous economies abroad are buying American-made goods. "It takes a lot to get the economy down,"
says Ethan Harris, chief economist at Lehman Brothers in New York. "It does have some natural resilience
in the face of shocks."

The economy empirically recovers without impact


Peter Lynch, Vice Chairman, Fidelity Management & Research, ABC News, Good Morning America, 9-18-01
Well we--you may not and it may take a little while. It is going to be choppy. I mean, people aren't going to decide when they're seeing news like this to go out and buy a sofa, go buy
a refrigerator. It's just very discouraging. So that tends to slow consumer confidence. The confidence of the consumer has been very high. We have record housing sales, housing
prices have gone up the last few years. As much as the stock market has gone down, housing prices--the average house has gone up more. So there's a lot of good things out there. The
We've had nine recessions since World War II--this might be
banking system is in very good shape. We have a lot of positives.
number 10--but we've got out of every one of them. And the stock market usually looks forward. It
doesn't look backward. So for a little while look to this uncertainty, but then I'll say, 'What are we going
to earn in 2003, 2004, 2005.' The market looks out, it doesn't look backwards.
WNDI 2008 13
Spending DA Aff

No Impact – China
Economic ties prevent US-China trade war
The Vancouver Sun, July 14, 2008, Money ties China, U.S. together
The economic ties between China and the U.S. run deep. China relies on the U.S. as their largest
export market, just as the Americans rely on China to fuel its outrageous consumption with cheap
imports. "It's kind of like the relationship between a junky and a dealer," explains economics expert
Nicholas R. Lardy of the Peterson Institute. "The junky needs the dealer so he can get his fix, but the dealer
also needs the junky to buy his drugs." Trade between the two nations is rising at a dizzying pace. In 1980
their trade totalled $5 billion; last year it was $387 billion. It is also heavily lopsided. The U.S. imports far
more from China than it exports, resulting in a trade deficit of over $250 billion. This enormous consumption
is rapidly pushing America's debt towards $10 trillion. The numbers can get overwhelming and the question
becomes: How does America stay afloat? The U.S. economy is buoyed by foreign investment into its
treasury securities. Japan still possesses the largest holdings, but China is catching up. Since 2000,
China's ownership of U.S. securities has grown from about $50 billion to over $500 billion. Some political
pundits are concerned that by becoming America's banker, China could exercise significant influence
over the U.S. But that's not really the case. There's an old adage that says, if you owe the bank $100, that's
your problem. If you owe the bank $100 million, that's the bank's problem. China is now so deeply invested
in U.S. securities, any disruption to the value of the dollar would be a serious blow to its own reserves.
And since the Chinese rely on the U.S. market for their exports, they're forced to buy up new securities
as soon as they're issued to prevent the yuan from appreciating against the dollar. Neither country holds a
significant advantage over the other. Despite the enormity of the U.S. economy, the two nations have
built a system of co-dependency. Or as Catherine Mann, professor of economics at Brandeis University
and former adviser to the chief economist at the World Bank, puts it -- a system of Mutually Assured
Destruction. I think you can characterize it a lot like nuclear weapons," she says. "Whoever uses the
weapon, invariably gets hurt too." Each country has the means to significantly disrupt the other's
economy, but the collateral damage within their own country could be just as severe.

China is rising peacefully and is working cooperatively with other nations.


David Shambaugh, Director of the China Policy Program @ George Washington University. International
Security, Volume 29, Issue 3, Winter 2005. “China Engages Asia.”
http://www.brookings.org/dybdocroot/views/articles/shambaugh/20050506.pdf
China’s growing economic and military power, expanding political influence, distinctive diplomatic voice,
and increasing involvement in regional multilateral institutions are key developments in Asian affairs.
China’s new proactive regional posture is reflected in virtually all policy spheres— economic,
diplomatic, and military—and this parallels China’s increased activism on the global stage.1 Bilaterally and
multilaterally, Beijing’s diplomacy has been remarkably adept and nuanced, earning praise around the
region. As a result, most nations in the region now see China as a good neighbor, a constructive partner,
a careful listener, and a nonthreatening regional power. This regional perspective is striking, given that just
a few years ago, many of China’s neighbors voiced growing concerns about the possibility of China
becoming a domineering regional hegemon and powerful military threat. Today these views are muted.
China’s new confidence is also reflected in how it perceives itself, as it gradually sheds its dual identity of
historical victim and object of great power manipulation. These phenomena have begun to attract growing
attention in diplomatic, journalistic, and scholarly circles, both regionally and internationally.2
WNDI 2008 14
Spending DA Aff

No Impact – Competitiveness
The US will inevitably lose competitiveness across numerous economic sectors
The Washington Times, 5-4-04, http://washingtontimes.com/upi-breaking/20040504-050045-2289r.htm
Geneva, May. 4 (UPI) -- The United States, Singapore, and Canada have been ranked as the world's
leading economies on competitiveness in 2004, according to a global survey published Tuesday. But the
study concludes the strong emergence of the larger Asian nations spearheaded by China, and India, and
soon Russia and central Europe "will generate a major shift in world competitiveness." The new breed
of emerging competitors, it says, "don't only provide manufacturing or services to western companies; they
compete in their own right with their own brands. They will assail markets, just as Japan did before, but
on a much wider scale." Globalization of the world economy, the study notes, has "quickly spread the
productivity revolution and techniques" to poor developing countries and underscores they now benefit
from both "lower labor costs and higher efficiency output." The report by the Lausanne-based
International Institute for Management Development (IMD) warns this combination "could be lethal for
traditional industrial countries and their workforce. Jobs will be lost, and companies activities will move
abroad." It adds the trends begun in the manufacturing sector now also affects the services industry.

“Economic competitiveness” is conceptually flawed: failure to compete doesn’t matter


Paul Krugman, Professor of Economics at the Massachusetts Institute of Technology, March/April 1994,
Foreign Affairs, http://www.pkarchive.org/global/pop.html
It was a disappointing evasion, but not a surprising one. After all, the rhetoric of competitiveness -- the view
that, in the words of President Clinton, each nation is "like a big corporation competing in the global
marketplace" -- has become pervasive among opinion leaders throughout the world. People who believe
themselves to be sophisticated about the subject take it for granted that the economic problem facing any
modern nation is essentially one of competing on world markets -- that the United States and Japan are
competitors in the same sense that Coca-Cola competes with Pepsi -- and are unaware that anyone might
seriously question that proposition. Every few months a new best-seller warns the American public of the
dire consequences of losing the "race" for the 21st century.ffi A whole industry of councils on
competitiveness, "geo-economists" and managed trade theorists has sprung up in Washington. Many of these
people, having diagnosed America's economic problems in much the same terms as Delors did Europe's, are
now in the highest reaches of the Clinton administration formulating economic and trade policy for the
United States. So Delors was using a language that was not only convenient but comfortable for him and a
wide audience on both sides of the Atlantic. Unfortunately, his diagnosis was deeply misleading as a guide to
what ails Europe, and similar diagnoses in the United States are equally misleading. The idea that a
country's economic fortunes are largely determined by its success on world markets is a hypothesis, not
a necessary truth; and as a practical, empirical matter, that hypothesis is flatly wrong. That is, it is simply
not the case that the world's leading nations are to any important degree in economic competition with
each other, or that any of their major economic problems can be attributed to failures to compete on
world markets. The growing obsession in most advanced nations with international competitiveness should
be seen, not as a well-founded concern, but as a view held in the face of overwhelming contrary evidence.
And yet it is clearly a view that people very much want to hold -- a desire to believe that is reflected in a
remarkable tendency of those who preach the doctrine of competitiveness to support their case with careless,
flawed arithmetic. This article makes three points. First, it argues that concerns about competitiveness are, as
an empirical matter, almost completely unfounded. Second, it tries to explain why defining the economic
problem as one of international competition is nonetheless so attractive to so many people. Finally, it argues
that the obsession with competitiveness is not only wrong but dangerous, skewing domestic policies and
threatening the international economic system. This last issue is, of course, the most consequential from
the standpoint of public policy. Thinking in terms of competitiveness leads, directly and indirectly, to bad
economic policies on a wide range of issues, domestic and foreign, whether it be in health care or trade.
WNDI 2008 15
Spending DA Aff

No Impact – Competitiveness
Monetary policy has the biggest impact on US competitiveness and foreign nations and the
US will always manipulate it to undermine US competitiveness
Pat Choate, director of the Manufacturing Policy Project and professor in Advanced Issues Management at George
Washington University, and Charles McMillon, 1997,
http://www.cooperativeindividualism.org/choate_trade_deficit.html
Changes in exchange rates alter the price competitiveness of goods and services virtually overnight.
When the dollar is strong, the competitiveness of US exports is reduced and that of foreign imports is
increased. The reverse is also true. Many other governments explicitly use their exchange rate as a
balance wheel to set the level of their trade balance. The Chilean government, for example, is currently
manipulating their Peso, which does not float freely. They have recently re-weighted the basket of currencies
to which the Peso is pegged. Much like the recent experience in Mexico, the Chilean Government's goal is to
maintain a US trade surplus with Chile during the time Congress considers Chile's accession into NAFTA.
US policy makers have never developed an exchange rate policy and rarely consider the exchange rate
consequences of economic policy. The Plaza Accord of 1985 in which the U.S. joined with other industrial
countries to weakened the dollar and to improve the US trade position was a rare exception. The value of the
dollar to the Yen fell from 256 Yen per dollar in 1985 to 82 per dollar in the mid-1990s. This currency
manipulation provided temporary trade relief. Nevertheless, other nations increased their competitiveness to
offset the US move and again the US trade deficit soared. Japanese auto makers, for instance, are competitive
at an exchange rate of 90 Yen per dollar. Virtually every other time that the U.S. Treasury has engaged
significantly in exchange rate measures has been to assist other countries or global financial interests. In
1995 -- as the U.S. faced record trade deficits -- the US Treasury increased the value of the dollar
against the Yen to assist Japan's Government and banking sector deal with a recession and financial
pressures. The result of US actions was to reduce the cost-competitiveness of US products in the Japanese
market and increase that of Japanese manufacturers here. It worked. Japanese auto makers are now
flooding the US market with their exports. The U.S. trade deficit soared to a new record in 1996 and seems
assured of setting another record in 1997. In short, the price competitiveness of goods in many nations is as
much a function of the Government exchange rate policy -- theirs and ours -- as of producers'
competitiveness. The net effect of all this is fewer US export receipts and more foreign import bills.