SOLVING SOCIAL SECURITY AND ENERGY INDEPENDENCE AT THE SAME TIME

When I mentioned to Interior Secretary Gale Norton at the White House Christmas Party this week that she was the key to solving Social Security and US energy independence – both at the same time – you can imagine how much her eyes widened. “I am?” she responded with wonderment and her beautiful smile.

We all know that Social Security will soon be sinking under the titanic weight of some $26 trillion in unfounded liabilities, with far too many young folks paying for far too many old folks. Beyond that, the program is a preposterous rip-off, paying retirees a negative rate of return for all the money they put in over the years, when inflation is factored in.

The argument for privatizing Social Security, transforming it from a Ponzi scheme ripping off young workers to pay for retirees, into actual retirement accounts personally belonging to individuals and growing exponentially with the magic of compound interest, is unassailable. Except for this one little multi-trillion dollar problem called “transition costs.”

Robbing-Peter-to-pay-Paul Ponzi schemes always collapse when you stop robbing Peter, and this can’t be allowed to happen because the geezer Paul vote would go berserk. In other words, there can’t be any cut in benefits. Social Security reform proposals to cut benefits, raise taxes, or increase the retirement age are politically suicidal: it is impossibly stupid for any Republican to advocate them.

Social Security checks have got to keep arriving for everyone in full for as long as the transition takes. Pro-privatization think-tanks like Cato that seriously study this problem estimate the transition cost would be around three trillion dollars.

It can be argued, as does Cato, that this is a “one-time cost” which should simply be absorbed by the taxpayer as it would eventually save ten times that long term. But politicians can’t electorally afford to think long term. Adding trillions of dollars to the already astronomical federal deficit is a hard, hard sell.

But what has this got to do with energy independence – which means in the reality of here-and-now, not in a far-off future of hydrogen fuel cells, producing our own oil? For the fact is that we are and will continue to be for some time an oil-based economy. Either we produce our own or we remain dependent on spooky foreign sources such as Saudi Arabia, Nigeria, and Venezuela. Those are the facts, ma’am.

But how can we produce more oil when we’re running out of it? It turns out that we’re not – and we’re not talking about Alaska’s ANWR (although it certainly should be drilled). We’re talking about hundreds of billions of barrels of oil right here in the continental US, untapped and available. It’s in a form of deposits called oil sands.

There are trillions of barrels of recoverable oil in oil sand and ultra-heavy oil deposits throughout the world. (Think of how laughable, in the light of this, is the eco-freak claim that “we’re running out of oil.”) Conoco is right now shipping by tanker 120,000 barrels a day to its Lake Charles LA refinery extracted from Venezuela’s Orinoco Heavy Oil Basin. This one single deposit contains over 1.6 trillion barrels, 275 billion of which is recoverable with current technology – which is more than the total reserves of Saudi Arabia (267). Over a million bpd will be produced within a few years.

The largest petroleum deposit in the world is the Athabasca Oil Sands in northern Alberta, with 315 billion recoverable barrels (close to two trillion total). Production via a number of producing consortiums currently exceeds 850,000 barrels a day, one third of Canada’s total.

While US oil sand deposits are dwarfed by Canada’s, there are nonetheless scores of billions of barrels right here – over ten billion in just in one area of Utah known as the Oil Sand Triangle. (Note: we are talking about real oil here, albeit ultra-heavy like molasses – not “oil shale” which is stuff that will become oil in a few million years.)

One of the catches (yes, there’s more than one) is that these deposits are on federally owned land. But this catch needn’t be a problem – for Gale Norton, it’s an opportunity.

Sitting down? The Federal Government owns one third of the United States. One-third or 650 million acres. 86% of the entire state of Nevada, 70% of Utah, 65% of Idaho, on and on. Subtract jewels like Yellowstone, the Grand Canyon, and many other places of national heritage that everyone wants kept public, and you still have a half-billion acres that could be… yes, sold. Sold, becoming private property, to pay for the privatization of Social Security.

Ah, I can see your mental calculator whirring. To raise three trillion for SS privatizing by selling a half-billion acres, that’s $6000 an acre. That’s a lot for a patch of desert in Utah. But a lot of those patches have a billion barrels of oil underneath them.

This is the free market solution. The Feds have no Constitutional right to own all this land, none whatever. But there’s no Constitutional authority for at least 80% of what Federal Government does now, so let’s not go there. Let’s stick to talking dollars and practical sense.

Yet we also have to talk politics, because standing in the way of this double solution are – you guessed it – the eco-fascists, the “environmentalist” Sierra Club crowd that hates private property. What’s needed is to explain that these folks are blocking the path to guaranteed continued Social Security checks, and thus launch a stampede of thundering geezers to trample the eco-freaks underfoot.

The one viable argument the Sierra Clubbers can make is that extracting oil from oil sands requires ecological rape. Oil is not drilled out of oil sand deposits, it is open-pit strip mined, then leached out with chemicals resulting in vast lakes of polluted waste water. Athabasca is an incredible ecological disaster. What’s needed is a low-cost environmentally-undamaging method of oil sand extraction.

A lot of companies are working on various methods. I myself own such a company. Pretty soon, one of us is going to figure out a proven way to get all that oil out of the oil sands cheaply and cleanly.

But there’s no need to wait until we do in order for the Double Solution to Social Security privatization and energy independence to be launched. You can expect a number of Washington think-tanks such as Heritage and Cato to begin working with Secretary Norton, and many other folks both in the White House and Capitol Hill on a conservative-libertarian solution to two of the largest problems we face.

[Personal note: I hope this goes some way to answering a query I received from TTP member Larry Copling, who asked my opinion of Cato’s Austrian economics. Let me add, Larry, that when I was a broke graduate student in 1969, I rode a bus from Los Angeles to Franconia Notch, New Hampshire to spend a weekend at the summer home of my intellectual hero, Ludwig Von Mises. He autographed my copy of Human Action, and it remains one of my most treasured possessions.]