Cold winds, tepid economy

Jan. 14, 2013
Despite occasional cold snaps, the US generally has experienced higher-than-average temperatures so far this winter. But during the first week of the New Year, meteorologists at AccuWeather.com forecast waves of frigid air from the North Pole may move south across North America by mid-January, producing much lower temperatures and spurring demand for natural gas and heating oil from the Mississippi Valley to the East Coast.

Despite occasional cold snaps, the US generally has experienced higher-than-average temperatures so far this winter. But during the first week of the New Year, meteorologists at AccuWeather.com forecast waves of frigid air from the North Pole may move south across North America by mid-January, producing much lower temperatures and spurring demand for natural gas and heating oil from the Mississippi Valley to the East Coast.

They reported a phenomenon known as sudden stratospheric warming recently occurred in the arctic region, 6-30 miles above ground. That in turn forced a buildup of cold air in the lowest layer of the atmosphere that is expected to drive south soon. "The problem is the exact timing and location of the emergence of this cold air is uncertain," AccuWeather.com reported.

Members of AccuWeather.com—s long-range forecasting team expect cold air to spread from central Canada from Jan. 7 through much of this month. This "brutal" cold push could arrive "in one big blast." However, AccuWeather.com forecasters said, "It is more likely the cold will advance along in waves of progressively colder air with each wave driving farther south and east."

The cold front initially "may seem to be run-of-the-mill or even delayed." But once it starts, AccuWeather.com reported, "It may run for quite a while with progressively colder and colder waves of air" and accompanying storms that could disrupt energy production, transportation, and generation while increasing demand.

Cooling economy?

Meanwhile, initial euphoria over Congressional agreement on a national budget New Year—s Day cooled quickly in energy and equity markets where investors are still concerned about their economic futures.

"By itself, the [budget] package raises little revenue, creates new cliffs, leaves hard choices for the future, and by separating revenue and spending debates may make the next showdown over the debt limit more difficult to resolve," said Robert Kahn, the Steven A. Tananbaum senior fellow for international economics at Washington, DC-based Council on Foreign Relations, a nonprofit think-tank specializing in US foreign policy and international affairs. Kahn is an expert in international economics.

Whether the budget agreement proves a progressive step in addressing long-term fiscal problems or is simply further evidence of dysfunctional government, Kahn said, "Uncertainty around fiscal policy seems here to stay."

He said, "While the political debate has focused on the historic nature of the tax increases, at the core this is a deal to not raise taxes. Compared with 2012 policies, gross tax revenue totals $620 billion over 10 years, and the deficit is reduced by $650 billion. While these are big numbers, they are small relative to the roughly $4 trillion in new deficits produced by the package compared with what would have happened if we went off the cliff."

The new financial crisis is the debt ceiling—"a cliff we had hoped could be avoided but was left unaddressed in this deal," said Kahn. The US Department of the Treasury announced the debt limit was reached at yearend 2012, but a series of financial maneuvers will postpone the problem into February.

Kahn expects "another down-to-the-wire negotiation with an immense amount at stake." He said, "When both sides think they have the leverage, deals are hard to come by. Further, with key tax elements now addressed, it may be harder to agree to the tradeoffs necessary to bridge these views."

He observed, "Governing by deadline is a terrible way of doing business. [It] leads to bad policy at home [and] weakens our status abroad. This deal avoids hard choices and ensures continued policy uncertainty that will be a drag on the economy. It produces a small amount of revenue and makes permanent tax rates that are too low for the long term. For all these negatives, give this deal a grade of incomplete."