Monday, March 18, 2013

Looking for a big increase in the minimum wage? Don't bank on it

Joshua Roberts / Reuters file photo
Sen. Tom Harkin4 speaks to reporters after a vote on Capitol Hill in Washington in this December 17, 2012 file photograph.

By Tom Curry, National Affairs Writer, NBC News
America’s 3.6 million minimum-wage workers will get a nearly 40 percent pay raise, if Sen. Tom Harkin, D-Iowa, has his way.
A few weeks after President Barack Obama touted a minimum wage increase to $9.00 in his State of the Union speech, the veteran senator introduced a plan to go even further, raising the low end of legal earnings from $7.25 to $10.10. For a person working 40 hours a week and 52 weeks a year, Harkin's bill would mean an increase of $5,928.
"[E]mployment is starting to go up, and we just don’t want minimum wage workers left behind and left out of this recovery," the Iowa Democrat said.
More than 70 percent of the American public favors raising the minimum wage, according to a recent Gallup poll, but Harkin's proposal faces an uncertain path to becoming law.
It’s difficult to imagine a scenario in which congressional Republicans would agree to Harkin’s bill. They generally believe that raising the minimum wage would lead to layoffs at the low end of the wage scale, hurting, not helping workers. But perhaps if wrapped into a larger deal on entitlements and taxes, an increase might get enacted.
Workers at or below the minimum wage accounted for 4.7 percent of hourly-paid workers and about 2.5 percent of all workers last year, according to the Bureau of Labor Statistics. Roughly half were 25 or older, nearly two-thirds were working part time, and less than three-fourths had graduated from high school, according to recent government data.
Leading the opposition to a minimum wage increase is the National Restaurant Association.
At a hearing last week of the Senate Health, Education, Labor and Pensions (HELP) Committee, which Harkin chairs, David Rutigliano, a partner in a Connecticut restaurant chain and a member of the Connecticut Restaurant Association, argued that "at a time when many businesses are struggling to keep their doors open and in some cases employers are foregoing their own paychecks to avoid laying off employees, mandating wage increases will only hurt those employees which this proposal seeks to help."
But another witness at the hearing,  Oregon Commissioner of Labor and Industries Brad Avakian, countered that raising the minimum wage would be good for the economy.
"Increasing workers’ purchasing power leads to a healthier economy. Virtually every dime that comes through a higher minimum wage is reinvested in the local economy when the worker buys groceries, gas, clothes, school supplies and other essentials," he said. Oregon pegs its minimum wage to the Consumer Price Index, which means it usually goes up slightly each year.
Related: Readers' stories: Life on minimum wage
Differing studies of the minimum wage are cited by advocates on the opposing sides of the debate.
Economist David Neumark at the University of California at Irvine, one of the leading scholars on the minimum wage, said in a recent paper written with two colleagues for the National Bureau of Economic Research, “The empirical evidence indicates that minimum wages pose a tradeoff of higher wages for some against job losses for others.”
But Harkin said, “On the opposite side, we do have some studies that show in comparative counties across state lines, that when one raised the minimum wage and the other didn’t – even though they are in the same locality and same basic market area -- it caused absolutely no job loss whatever in the state that raised the minimum wage.”
Harkin is referring to 1992 and 1994 studies by economists Alan Krueger and David Card. Krueger, on leave from Princeton University, is now head of Obama’s Council of Economic Advisors.
In 2007, President George W. Bush signed into law the most recent increase in the federal minimum wage, bringing it to $7.25 an hour by 2009 (some states have higher minimums).
Harkin's proposal would increase the minimum wage to $10.10, in three steps, and then index it to the Consumer Price Index starting three years after enactment.
Defending Obama's lower proposed increase, Obama economic adviser Jason Furman said last month that “$9.00 an hour is a robust increase in the minimum wage and would put it at a higher level adjusted for inflation than any time since 1981.” Furman also said that refundable tax credits, which are essentially cash payments from the federal government to workers, when combined with a higher minimum wage, would lift low-wage workers above the federal poverty line.
Despite the disagreement on the size of the proposed increase in the minimum wage, Harkin said he and his staff have been in discussion with Obama staffers and “we’re not too far apart.”
Paycheck to paycheck
As the recession hit in 2008, 2009 and 2010, Bush, Obama, and Congress used refundable tax credits to boost income for low-wage workers.
Harkin said refundable tax credits aren't as useful to workers because they are only paid periodically, while an increase in the minimum wage is paid every time a worker deposits or cashes a paycheck.
“Most people who are at that level pretty much live from paycheck to paycheck, so that’s why refundable tax credits don’t necessarily do the job,” he said.
And by relying on the EITC and other tax credits the government is “supporting low-wage paying employers who pay their workers so little that they rely on programs like the EITC or other tax credits or food stamps and Medicaid,” Harkin said. “Those employers are being subsidized by taxpayers. I think the private sector should also be responsible for ensuring that their workers can put food on their table.”
In their rebuttal, Republicans cite the need for more jobs at all wage levels. Republicans point to one finding in the most recent “Beige Book” report from the Federal Reserve which surveyed business conditions across the nation: “Employers in several Districts cited the unknown effects of the Affordable Care Act as reasons for planned layoffs and reluctance to hire more staff.”
“The way to help the 12 million unemployed workers in America is not to put a new tax or cost on employers that will cause them to reduce the number of jobs which this (Harkin’s proposal) will do,” said Sen. Lamar Alexander, R- Tenn., the top Republican on Harkin’s HELP Committee.
“The people that we’re trying to help in this country right now are mainly low income, minority, often young people -- and every time we add a $2,000 penalty for the health care law or add some new mandate from Washington like the minimum wage, it may sound good, but the effect of it is to limit the number of jobs for people who most desperately need them.”

European markets dive, ATMs emptied amid Cyprus bailout crisis

Yorgos Karahalis / Reuters
Demonstrators raise their arms in protest as Cypriot President Nicos Anastasiades's convoy drives to the parliament in Nicosia, Monday.
LONDON – Financial markets in Europe fell sharply in early trading Monday following the surprise announcement of a levy on bank accounts in Cyprus as part of a financial bailout.
London's FTSE 100, Frankfurt's DAX and Paris's CAC-40 were down 1.4, 1.6 and 2 percent respectively as of 4:30 a.m. ET as traders' screens showed a sea of red, CNBC reported.
Cypriots and foreign investors emptied ATMs following Saturday’s unexpected 10 billion euro ($13 billion) deal under which savers must surrender up to 10 percent of bank deposits. Banks in Cyprus were due to remain closed because of a public holiday Monday.
Adding to the uncertainty, Greek media reports on Monday suggested Russian energy giant Gazprom might offer Cyprus an alternative to the bailout.
Russian citizens account for the majority of the billions of euros held in Cypriot banks by foreign depositors, and Moscow has already given the Mediterranean country a sovereign loan to ease its financial crisis.
Russia’s president Vladimir Putin criticized the bailout as “unfair, unprofessional and dangerous,” Reuters said, citing a spokesman.
The Economist also criticized the deal, describing it as “unfair, short-sighted and self-defeating.”
The parliament in Cyprus was due to vote Monday on the euro zone package, which was agreed by the European Union and the International Monetary Fund and appeared to contradict assurances that last year’s expensive bailout of Greece was a one-off.
The European market dive echoed earlier falls in Asia. The euro itself fell below $1.29 to its lowest level in three months, CNBC reported.
Markets in Italy and Spain – countries regarded at the highest risk of further financial crisis – saw some of the biggest share falls, particularly in the banking sector.

Katia Christodoulou / EPA
A woman unsuccessfully attempts to withdraw from a Cypriot bank ATM in Greece on Sunday.
"It's a Cyprus shock,” Ken Hasegawa, a commodity sales manager at Newedge in Tokyo, told Reuters.
The bailout caused dismay in Cyprus. “They shouldn’t touch the deposits.  They’re just killing the people,” 58-year-old Miltiades Papamiltiades, an unemployed former construction worker, told the English-language  Cyprus Mail news site. “No-one will ever deposit money again into the banks on the island. It is the end of our economy,” he added.
Of the $90 billion deposits held in Cyprus banks, a little under half is held by non-residents, mostly Russian.
Alex Spilius, of the U.K.’s Daily Telegraph, reported that Cyprus in recent years had become, like off-shore haven Monaco, “something of a sunny place for shady people.” He wrote:
“By 2011, the IMF reported that the assets of Cypriot banks were equivalent to 835 per cent of annual national income. Some of that was down to investment by foreign-owned banks, but most was Cypriot.
This imbalance might have been sustainable had the country’s two largest banks not made loans to the Greek government worth 160 per cent of Cypriot GDP. It has never been clear whether that risk was taken out of ethnic solidarity, or from a presumption that the Greeks knew what they were doing. But in any event, it was disastrous.”
Spain's economic crisis turns middle-class families into illegal squatters
'The country is on its knees': Ireland grapples with economic collapse
Greek tragedy: Economic crisis sparks brain drain

RNC sets sights on Latinos; polls show immigration reform key ingredient

RNC Chairman Reince Priebus announced the organization is endorsing immigration reform and will engage in greater GOP Latino outreach.
RNC Chairman Reince Priebus announced the organization is endorsing immigration reform and will engage in greater GOP Latino outreach. (Photo/Getty Images )

Months after President Barack Obama’s resounding win over Republican Mitt Romney, the GOP is out with a plan to target the voters who many credit with putting the president over the top: the nation’s burgeoning Latino electorate.
President Barack Obama’s 71 percent share of the Latino vote in November’s election, as well as the overwhelming support among Latinos of all political parties for immigration reform, has led to an important shift in the Republican party’s policies and outreach to Latino voters.  Today the Republican National Committee announced its support for comprehensive immigration reform and vowed to spend $10 million this year on hiring staff  to  expand outreach to Latino and other voting groups. The moves were announced as part of a rollout of the party’s Growth and Opportunity Project  report.
“When Republicans lost in November, it was a wake-up call,” said Republican National Committee (RNC) chair Reince Priebus.  ”Our message was weak, our ground game was insufficient; we weren’t inclusive,” added Priebus.
Republican strategist Luis Alvarado, co-founder of Grow Elect, a PAC to recruit, train and fund Latino Republican candidates, says endorsing comprehensive immigration reform and pledging greater outreach to Latino voters is critical to the GOP.
“You can’t just change the pizza box, you have to change the pizza as well,” says Alvarado, who is based in Los Angeles, California.  ”When Latinos see a Donald Trump at CPAC, they get the impression that he is speaking on behalf of the party,” says Alvarado.  He was referring to recent comments made by Trump saying that supporting immigration reform is a “suicide mission” since the “11 million illegals” would vote Democrat if they are given a path to citizenship, and that immigration reform should bring in more “people from Europe.”
Alvarado worries voters will think Republicans with anti-Latino or anti-immigrant rhetoric speak for the whole party and says the new RNC strategy is important. “It’s a very sobering report, it’s refreshing to see how in-depth and how specific the report was regarding the challenges the Republican party has and the opportunities to reach out,” Alvarado adds.
As part of the Growth and Opportunity Project, the RNC also wants to create Senior Level Advisory groups within the Latino community, regularly engage with Latino civil rights organizations – “groups with which we’ve had minimal contact in the past,” said Preibus – and build a recruitment program for minority candidates.  The $10 million spending blitz to attract minorities and young people in the next few months is also a marked contrast to spending during the elections. A few months before the November elections, the Obama campaign had spent $6.1 million on Spanish-language advertising, almost 12 times more than Romney’s Spanish-language campaign, which had spent $521,000, according to NBC News.

RELATED: GOP report calls for sweeping reforms to compete in 2016

Right now, however, the biggest move Republicans can do to get the attention of Latino voters is to help pass comprehensive immigration reform with a pathway to citizenship, said Stanford political scientist Gary Segura. In a press call today, Segura went through the results of a recent Latino Decisions poll of registered Latino voters which found that 64 percent of Latino Republican voters and 71 percent of independent Latino voters think immigration reform should be a Congressional priority this year.   The poll also found support was solid among college-educated Latinos as well as working class Latinos, as well as naturalized and U.S.-born Hispanics.
More importantly for Republican strategists, the poll found that  even 26 percent of Latino Obama supporters, 35 percent of  Latino independents, and 38 percent of Hispanics aged 18-to-39 say they would be more likely to vote for a Republican candidate if the party helped push immigration reform.  Among Hispanic Republicans, 8 percent said they would be less likely to vote Republican if the House blocks an immigration reform bill.
If Republicans can get the immigration issue resolved, “there is room for electoral growth for the Republican party,” said Segura.  ”Fifty thousand Latinos turn 18 every month; it’s a very daunting prospect for a party that got 25 percent of the Latino vote,” he added.
 Clarissa Martinez-De-Castro, Director of Civic Engagement and Immigration for the National Council of La Raza, said “Republicans need to rebuild their relationship with the electorate; the biggest wins or losses can be accrued by Republicans,” according to Martinez-De-Castro. ”Changing course on this issue allows them to have a new calling card to rekindle their relationship,” she stated.
Republican Latinos such as Luis Alvarado say the Growth and Opportunity report is a good first step, but it’s only the beginning.
“The commitment for $10 million for minority outreach sets a precedent that the rhetoric is followed by action,” says Alvarado.  He adds, “it is the follow through that ensures success.”

Poverty in America: A problem hidden 'In Plain Sight'

By Barbara Raab, Senior Producer, NBC News
Welcome to the home of “In Plain Sight,” a special initiative by NBC News to report on poverty in America, especially as it appears in forms and in places that many people overlook or choose to ignore.
With more than 46 million Americans living below the poverty line, including 16 million children, our goal is to put a human face on a problem that often can seem overwhelming.
We also plan to cover efforts to ease or even eradicate poverty. This includes heroic individuals who have devoted their lives to working among the poor and the debate over the proper role of government in fighting the problem.
What, exactly, is "poverty"? According to the U.S. Census Bureau, it's less than $11,945 per year for a single person, and $23,283 for a family of four.
Nearly a quarter of people in poverty have jobs, but their pay is so low that they still don't have enough money to meet basic needs like food, shelter, clothing and health care. It's also worth noting that women are more likely to be poor than men, and African-Americans, Latinos and Native-Americans are more likely to be poor than whites.
An evolving conversation
This nation has been talking about poverty and how to solve it for a long time now.

President Johnson declared a “war on poverty” in his 1964 State of the Union speech. At that time, the poverty rate was 19 percent and the poverty threshold was $1,558 for individuals.
From LBJ's declaration came the American safety net -- programs like Medicare, Medicaid, food stamps and cash assistance. Over the next decade, poverty rates in the U.S. dropped to their lowest level -- 11.1 percent -- since the government began keeping a comprehensive count.
In 1996, President Bill Clinton and House Speaker Newt Gingrich made a deal on what is often called “welfare reform,” with a new emphasis on work and self-sufficiency.

Some hail the overhaul of the welfare system and the subsequent drop in the number of people receiving cash assistance as a huge success. Critics say the safety net has become frayed, with too few getting too little help.
In the lead-up to President Obama’s State of the Union address last month, some of those who believe there’s a lot more work to be done to eradicate poverty in America took to Twitter using the hashtag #TalkPoverty, imploring the president to address the issue and propose solutions. He did not disappoint.

So while the conversation about poverty in America has been going on for decades, it seems to be taking on a new urgency, for women and children struggling to survive (more than half of poor families are headed by single moms), for formerly middle-class families and individuals who have slipped down the ladder, for young people starting out under the weight of crushing student debt.
Share your thoughts
We will explore those and other themes here and on NBC News broadcasts. And we’d like to know your thoughts: What should we be covering, what examples of poverty are you seeing in plain sight? Email us at and tweet using the hashtag #inplainsight.
A quick word about me: I am a longtime NBC Nightly News writer and producer, with a background in American history and law, on leave from my position at Nightly to lead this project. I am @bbabbo1 on Twitter.
And a final word about support for this project: The Ford Foundation has made a grant to NBC News to facilitate our reporting on poverty in America, and we welcome their support.

Man suspected in death of NYC woman in Turkey nabbed in Syria

Mom of missing woman in Turkey talks about her loss

Sarai Sierra, 33, arrived in Istanbul last month on a solo trip, her first abroad. Turkish authorities discovered her body nearly two weeks after she disappeared on Jan. 22, reportedly killed by a blow to the head. NBC’s Richard Engel reports and her mother, Betsy Jimenez, speaks about her loss.

On the Brink: Syria chaos looms large over Obama's Israel trip

Baz Ratner / Reuters
A United Nations peacekeeper stands on an observation tower at the Kuneitra border crossing between Israel and Syria in the Israeli-occupied Golan Heights on March 8.

In the second part of our "On the Brink" series previewing President Barack Obama’s trip to the Middle East, NBC News correspondent Martin Fletcher -- who has reported from the region for three decades -- examines the threat of renewed conflict on the Syria-Israel border.

News analysis

United Nations peacekeepers have monitored a buffer zone between Israel and Syria for nearly four decades, following Israeli forces’ capture of the Golan Heights in the Yom Kippur War of 1973.

But Israeli officials now fear the 1,000-strong force could disintegrate after mounting threats against them and the kidnapping of 21 Filipino observers by a Syrian Islamist militia, though they were later released. Croatia has already pulled out its 100 soldiers.

Israel’s concern, shared by the United States, is that al Qaeda elements will establish themselves in the buffer zone and threaten Israel with chemical weapons and long-range rockets captured from the Syrian army.

The world has been focusing on the idea that Israel will attack Iran, but military action is perhaps more likely in the Golan – a strategically important area roughly the size of Queens in New York, whose heights dominate northern Israel and the Sea of Galilee.

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President Obama makes his first trip to Israel where he will meet with Israeli President Shimon Peres and Prime Minister Benjamin Netanyahu as well as Palestinian Authority President Mahmoud Abbas. NBC's Peter Alexander reports.

When President Barack Obama and Prime Minister Benjamin Netanyahu meet Wednesday, the idea of military cooperation between Washington and Jerusalem in that eventuality -- especially in intelligence and air support -- will doubtless be discussed.

Other issues include future control of the Syrian government’s large supplies of non-conventional weapons and its modern military, and how to further weaken Syria’s puppet in Lebanon: Hezbollah.

Regional conflict?
It is in everyone’s interest to maintain the quiet that has reigned along the Syria-Israel border almost undisturbed since a 1974 armistice agreement, which ended the months-long attritional conflict that followed the Yom Kippur War.

But as the Syrian army and the Syrian Free Army, backed by numerous militias, batter each other, the struggle threatens to spill over into Syria’s neighbors, further destabilizing an already roiling region.

A million refugees have fled Syria and there are conservative estimates that another million people have been forced to flee their homes and seek shelter inside the country.

And the rate is shooting up. The U.N. says 400,000 have fled Syria since Jan. 1. Projections say that by 2014 there could be 3 million refugees outside the country -- 15 percent of the population.

Also in this series: Israel to grill Obama over possible military strike on Iran

Most at risk are Jordan and Turkey, two stable countries that have been beacons of calm in the turbulent Middle East.

Jordan has taken in close to half a million Syrians and Turkey, with more than 200,000, refuses to take any more.

The challenge facing the United States and Israel, as well as the rest of the concerned world, is how to end a conflict when neither combatant shows the slightest inclination to stop fighting.

Slideshow: Syria uprising

A look back at the conflict that has overtaken the country.
Launch slideshow

The Free Syrian Army says there is only one way: Give it the weapons it needs to finish off President Bashar Assad's regime. Israel is strongly against a new French and British move to arm the rebels with serious offensive weapons. Israel’s fear is that they will fall into the hands of Islamist groups that will then turn them against Israel.

Backed by Russia, Iran and an increasingly unenthusiastic China, Assad warns he will fight till the end.

The end result could well be the breakup of Syria into Sunni, Shiite, Druze, Alawite and Christian fiefdoms, or combinations thereof, turning the country into a Levantine Somalia.

The fallout from such chaos on the doorstep of Israel, Turkey, Lebanon, Jordan and Iraq doesn’t bear thinking about.

So how to prevent this nightmare scenario? It would seem that one way or another, a clear winner would be the preferred solution, or a compromise between the warring parties.

This is a pressing issue, but there is another that is even closer to home for Israel: the decades-long conflict with the Palestinians.

On Tuesday, Martin Fletcher examines the prospects for a lasting peace deal and Palestinian state in the final installment of his series of articles ahead of Obama's visit to the Mideast.

Martin Fletcher is the author of “Walking Israel.”

Slideshow: Behind Syrian rebel lines

Machine guns operated by motorcycle brakes? Get a glimpse at the rebels fighting against Assad's forces in Syria's mountainous Jabal al-Zawiya area.


Tale of a kidnapping: NBC News journalist reveals Syria ordealSyria threatens military action in Lebanon

Reducing the Deficit: Spending and Revenue Options

This an interesting document by the CBO, I am not the bright mind that understands at least this, but it looks scarey.options 27 - 29 I believe show chained cpi.

Chapter 2 starting at option 12 pertains to healthcare, medicare, social security, medicaid....

Chained CPI Could Relieve the National Debt. So What Is It? 

Check out the next entry, has a lot of options for reducing the deficit.
Updated: December 12, 2012 | 7:07 p.m. December 12, 2012 | 4:40 p.m.
AP Photo/Matt Rourke
Shopper Ann Murphy gathers produce at a WalMart in Deptford N.J.

There’s one deficit-reduction idea in Washington that sounds like a no-brainer. It’s a single tweak that could raise about $72 billion in tax revenue and cut spending by about $145 billion through 2021, according to the Congressional Budget Office’s 2011 calculations. It could be enacted quickly, and would ramp up so slowly that it could be 10 years before anyone notices they’ve been hit by both a tax increase and a benefit cut.

But in Washington, no solution is ever that simple—particularly when it involves Social Security. Tying parts of the tax code and certain federal benefit programs to a new consumption metric, called the “chained CPI,” is an idea that almost everyone supports in theory but hardly anyone is willing to risk in practice.

“It’s a more accurate cost-of-living adjustment, and that certainly recommends it,” said Jared Bernstein, a former White House adviser and a senior fellow at the Center on Budget and Policy Priorities. But “it’s a benefit cut, and it’s a benefit cut that grows as you age, because the more you age, the more the difference compounds over time,” he said.

Switching to the chained CPI is a mainstay of deficit-reduction recommendations, and President Obama and House Speaker John Boehner floated the idea during the 2011 debt-ceiling negotiations. It’s unclear, though, whether the switch will gain much traction this time around.

Here’s how the new metric would save money: Social Security, federal pensions, and military and veterans’ benefits are indexed to rise each year with inflation; so are tax brackets, exemptions, deductions, and credits. But experts say the consumer price index the government currently uses overstates how rising prices affect household spending.

The Bureau of Labor Statistics has come up with a more accurate measure, which accounts for consumers’ tendency to switch to cheaper categories of products when prices rise. Rather than looking at a fixed set of goods—as the standard formula does—the new measure looks at how the set of goods changes, and then “chains” two consecutive months of consumption data together.

The chained CPI rises a little more slowly than the current measure. So if the chained CPI were used to calculate cost-of-living increases, it would mean smaller increases to Social Security checks each year. If the chained CPI were applied to the tax code, it would move taxpayers into higher tax brackets faster.

Opponents of the chained CPI say that it would unnecessarily cut Social Security and other benefit programs, burden the oldest and sickest Americans, and hit almost everyone with a tax increase. The deficit-reduction plans floating around Washington—such as the Simpson-Bowles plan—recommend that a switch to chained CPI involves additional protections for the most-vulnerable beneficiaries.

That caveat still doesn’t make chained CPI an appealing policy option, said Andrew Biggs, resident scholar at the American Enterprise Institute and a former principal deputy commissioner of the Social Security Administration.

“I’m not sure you want to go wholesale change to the chained CPI. One reason is, it’s not based on the purchasing habits of the elderly,” Biggs said. The consumption patterns of a working household aren’t the same as the consumption patterns of, say, an 85-year-old Alzheimer’s patient living on a fixed income.

Advocates for the elderly agree. “If you’re going to say that you’re doing this for the sake of accuracy, then let’s be fair,” said Cristina Martin Firvida, AARP’s director of government relations for economic security. Because health care costs are rising faster than inflation, and seniors spend a lot of money on health care, cost-of-living adjustments should reflect that, she said.

AARP favors an experimental metric, the CPI-E, which attempts to calculate the spending habits of the elderly. The problem with that metric is that it wouldn’t do much to slow the growth rate of Social Security payments; in fact, it could actually make payments grow faster.

Social Security’s annual cost-of-living increases have a history of inflaming partisan passions. In 1985, Senate Republicans passed a bill that would have capped the cost-of-living increase in Social Security. Democrats used the vote to brand GOP senators as a threat to the program. “That’s why we lost control of the Senate in 1986,” said Steve Bell, senior director of economic policy at the Bipartisan Policy Center.

During current deficit-reduction negotiations, the Obama White House and Senate Democrats have been emphatic that Social Security must remain off the table. “Social Security is not currently a driver of the deficit. That's an economic fact,” White House press secretary Jay Carney said last month. AARP and other advocacy groups have been making the rounds on Capitol Hill, reminding lawmakers of their campaign promises not to touch entitlements for current retirees.

“This, to me, is symbolic of how attached people are to the status quo,” Bell said. Social Security checks would still go up every year if the chained CPI was used to calculate them—just not by as much. The fact that lawmakers can’t even find a way to address the growth rate of benefit payments is symptomatic of a larger problem, he said.

“We face $10 trillion of new debt over the next 10 years, more or less, and we’re sitting here discussing and fighting over a reduction in the rate of increase,” Bell said. “Can you imagine how hard it will be for us to get any significant, large, I mean real, deficit deal?”

RNC Chair Reince Priebus speaks at March 18, 2013 National Press Club Breakfast

GOP report calls for sweeping reforms to compete in 2016

By Michael O'Brien, Political Reporter, NBC News

The Republican National Committee released an audacious set of recommendations on Monday aimed at revitalizing the party following the drubbing suffered by GOP candidates last November, calling for sweeping changes to the party's infrastructure, outreach and nominating process to contend for the White House in 2016.

The RNC's 100-page report, the "Growth and Opportunity Project," is the election autopsy ordered by Chairman Reince Priebus last fall.

Handout / Getty Images
Chairman of the Republican National Committee, Reince Priebus, appears on ''Face the Nation'' on March 17, 2013 in Washington, D.C.

Culled from more than 52,000 contacts with voters, party consultants and elected officials, it calls for drastic changes to almost every major element of the modern Republican Party.

"When Republicans lost in November, it was a wake-up call. And in response I initiated the most public and most comprehensive post-election review in the history of any national party," Priebus said Monday morning at the National Press Club. "As it makes clear, there’s no one reason we lost. Our message was weak; our ground game was insufficient; we weren’t inclusive; we were behind in both data and digital; our primary and debate process needed improvement."

In essence, the report argues for a more data-driven Republican Party in which the RNC assumes increased authority for party-building efforts.

The report calls for increased outreach to women, young voters and minorities — especially Hispanics. The document acknowledges the GOP’s policy on immigration has become a “litmus test” for what will be a key constituency necessary for the party’s success in the next four years and beyond.

"We are not a policy committee, but among the steps Republicans take in the Hispanic community and beyond, we must embrace and champion comprehensive immigration reform," the report says, nodding at other points to the bipartisan reform efforts currently before Congress. "If we do not, our Party’s appeal will continue to shrink to its core constituencies only."

The report also notes a growing generational divide on the issue of gay rights, calling the issue a "gateway" for young voters deciding whether to align with the GOP.

"We can't grow the party by division and subtraction," Priebus said during a question-and-answer session at the press club. "We can only build it by addition and multiplication."

But the report is hardly focused on social issues alone. Its top recurring theme arguably involves building a robust Republican data infrastructure, and applying a commitment to testing and analysis of almost every operation of the RNC.

Priebus is advised to hire a chief technology officer and digital officer by the end of April, and give them wide latitude to inform aspects of the party from fundraising to media strategy and messaging and beyond.

"Those teams will work together to integrate their respective areas throughout the RNC and provide a data-driven focus for the rest of the organization," Priebus said. "And they will be the new center of gravity within the organization."
The GOP's digital revamp — as with most of the other elements of the report — was prompted by the Obama campaign's far more sophisticated operation in 2012.

Many of the reforms proposed by the Growth and Opportunity Project, however, will encounter stiff resistance in corners of the Republican Party and broader conservative movement — because of a deep distrust of the official GOP among the grassroots.

Former Alaska Gov. Sarah Palin encapsulated the sentiment during her speech on Saturday before the Conservative Political Action Conference.

"Now is the time to furlough the consultants, and tune out the pollsters, send the focus groups home, and toss the political scripts," she said, "because if we truly know what we believe, we don't need professionals to tell us."

And some of the report's declarations are sure to ruffle feathers on the Right.

The report says bluntly at one point that "third-party groups that promote purity are hurting our electoral prospects," an indirect reference to groups like the Club for Growth, which has promoted challenges to Republicans regarded as more electable who are accused of transgressing against conservative principle.

A spokesman for the Club for Growth had no comment about the report, and Ari Fleischer, one of the leaders of the GOP project, argued that success would involve overcoming resistance from fellow Republicans.

"Successful parties learn and grow, and you do the best learning after you lose," he said at a press conference Monday morning.

The report also calls super PACs a "wild card" that threaten to weaken an eventual nominee due to the onslaught of negative advertising during primaries. (2012 Republican presidential nominee Mitt Romney suffered from this type of friendly fire during his slog to the nomination.)

The report calls for broader changes to the Republican primary system, too, especially as it relates to picking a presidential candidate. It calls for prohibiting primary debates before Sept. 1, 2015, and limiting the total number of debates to 10 or 12 -- and possibly docking delegates from candidates who ignore the rules.

The report also calls for holding the Republican National Convention in late June or July, necessitating that the primary process concludes between late April and mid-May.

To accomplish that, the Growth and Opportunity Project recommends for a major — and likely contentious — overhaul to the primary calendar in which groups of states in a similar region would vote on the same date. The so-called "regional primary system" would follow traditional nominating contests in states like Iowa and New Hampshire, for which there would be an exception.

Furthermore, the report recommends that Republicans ditch caucuses and conventions — venues in which conservative activists traditionally dominate — in favor of primaries for picking a nominee.

Among the report's assorted other recommendations:

  1. Establish a new "Growth and Opportunity Inclusion Council" tasked with reaching out to Hispanics, African Americans, Asians and Pacific Islanders, Native Americans and other minority communities;
    1. Commit an initial $10 million to improving outreach to minority communities;
  2. Set up an "RNC Celebrity Task Force of personalities in the entertainment industry" to attract young voters, and encourage Republican leaders to "participate in and actively prepare for interviews" on the Daily Show, the Colbert Report and other media aimed toward younger Americans;
  3. Place a greater emphasis on early voting in political strategy, messaging and budgeting;
  4. Invest in full-time field staff in states beginning at a much earlier point in election cycles;
  5. Convene a quarterly summit of Republican pollsters, ensure an accurate model of likely voters and turnout for polling, and recommend that GOP polls include a 25 percent subsample of respondents who can be reached by cell phone only;
  6. Explore making more efficient television advertising purchases, including possibly shifting resources away from paid media and toward organizational efforts and alternative methods of voter contact;
  7. Work with outside conservative groups (to the extent that it's legal) to better define different organizations' responsibilities;
  8. Encourage a well-funded conservative group (akin to Democrats' group, American Bridge) dedicated to full-time tracking and research of Democratic candidates;
  9. Expand the RNC's low-dollar fundraising program, and seek more efficient finance staffing;
  10. "Convince Congress to remove the biennial aggregate contribution limits," or, absent that, seek to increase the contribution limits for federal campaigns;
  11. Abolish the public financing system for presidential campaigns, including the matching funds program;
  12. Replace taxpayer funding of national party conventions with a system in which party committees could raise additional funds for the conventions;
  13. Allow party committees to raise additional funds to support the maintenance of their buildings and facilities.

Cyberattack on Florida election is first known case in US, experts say

Tim Chapman / Miami Herald
About 2,000 rejected absentee ballots at Miami-Dade Elections Department, mostly for lack of signatures or review of signatures from the last election.

By Gil Aegerter
Staff Writer, NBC News

An attempt to illegally obtain absentee ballots in Florida last year is the first known case in the U.S. of a cyberattack against an online election system, according to computer scientists and lawyers working to safeguard voting security.

The case involved more than 2,500 “phantom requests” for absentee ballots, apparently sent to the Miami-Dade County elections website using a computer program, according to a grand jury report on problems in the Aug. 14 primary election. It is not clear whether the bogus requests were an attempt to influence a specific race, test the system or simply interfere with the voting. Because of the enormous number of requests – and the fact that most were sent from a small number of computer IP addresses in Ireland, England, India and other overseas locations – software used by the county flagged them and elections workers rejected them.

Computer experts say the case exposes the danger of putting states’ voting systems online – whether that’s allowing voters to register or actually vote.

“It’s the first documented attack I know of on an online U.S. election-related system that’s not (involving) a mock election,” said David Jefferson, a computer scientist at Lawrence Livermore National Laboratory who is on the board of directors of the Verified Voting Foundation and the California Voter Foundation.

Other experts contacted by NBC News agreed that the attempt to obtain the ballots is the first known case of a cyberattack on voting, though they noted that there are so many local elections systems in use that it's possible that a similar attempt has gone unnoticed.

There have been allegations of election system hacking before in the U.S., but investigations of irregularities have found only software glitches, voting machine failures, voter error or inconclusive evidence. Where there has been evidence of a computer security breach -- such as a 2006 incident in Sarasota, Fla., in which a computer worm that had been around for years raised havoc with the county elections voter database -- it was unclear whether the worm's appearance was timed to interfere with the election.

In any case, experts say they’ve been warning about this sort of attack for years.

“This has been in the cards, it’s been foreseeable,” said law Professor Candice Hoke, founding director of the Center for Election Integrity at Cleveland State University.

The primary election in Miami-Dade County in August 2012 involved state and local races along with U.S. Senate and congressional contests (see a sample ballot here). The Miami Herald, which first reported the irregularities, said the fraudulent requests for ballots targeted Democratic voters in the 26th Congressional District and Republicans in Florida House districts 103 and 112. None of the races’ outcomes could have been altered by that number of phantom ballots, the Herald said.

Overseas “anonymizers” -- proxy servers that make Internet activity untraceable -- kept the originating computers’ location secret and prevented law enforcement from figuring out who was responsible, according to the grand jury report, issued in December. The state attorney’s office closed the case in January without identifying a suspect.

Read the Miami-Dade County grand jury report (PDF)

Then came the Herald report, which said that three IP addresses in the United States had been identified among those sending the requests and that there had been a delay in getting that information to investigators, which a Miami-Dade elections official confirmed to NBC News.

 Terry Chavez, spokeswoman for the state attorney’s office for Miami-Dade County, also confirmed to NBC News that the investigation was reopened to look into those IP addresses. Chavez said she could release no details on the investigation.

Rep. Joe Garcia won the Democratic primary in the 26th District and went on to win the general election. Jeff Garcia, his chief of staff and no relation, said last week that no state or federal investigators had contacted the congressman's office about the case.

State Rep. Jose Javier Rodriguez, a Democrat who won the District 112 seat, said Thursday that his office had not heard from investigators about the case either. A message left at the legislative office of state Rep. Manny Diaz Jr., the Republican who won the primary and the general election in District 103, was not immediately returned.

The Herald report said that as the requests began coming in, elections officials figured out that they were improper and started blocking the IP addresses. “I guess they finally gave up,” the newspaper quoted Bob Vinock, an assistant deputy elections supervisor for information systems, as saying.

People who study election security say the fact that this attempt did not succeed should be of little comfort to election officials. They warn that attempts to attack voting systems are likely to increase.

“In this case the attack was not as sophisticated as it could have been, and it was easy for elections officials to spot and turn back,” said J. Alex Halderman, an assistant professor of computer science and engineering at the University of Michigan who studies the security of electronic voting. “An attack somewhat more sophisticated than the one in Florida, completely within the norm for computer fraud these days, would likely be able to circumvent the checks.”

  • Fraudulently obtaining absentee ballots is just one way elections might be subverted by digital means, experts say. Among the other methods and attack points:
  • Malware. Rogue software infects millions of home computers across the country. Jefferson said hackers could use malware to change votes or prevent them from being cast in an online election.
  • Denial of service attacks. Jefferson said that hackers could use botnets to prevent election-system servers from working for hours, or perhaps longer. In fact, during an election in June 2012, a DOS attack hit the San Diego County Registrar of Voters' website, preventing voters from tracking the results.
  • “Spoofing” of election websites. For example, Hoke said, legitimate requests for absentee ballots could be misdirected to another site. The data then could be misused, or the requests could hit a dead end, and voters would be left wondering where their ballots were.
  • Exploiting software flaws in digital voting machines, known as DREs. The flaws could allow insertion of viruses or alteration of programming code that would change votes or delete them. (Read one description of hacking a voting machine.)
  • Tampering with email return of marked ballots. Experts say email return is troublesome because of the multiple points for attack along the ballots’ electronic path. “The overwhelming consensus of the computer science community is don’t do it, it’s a bad idea,” said Jeremy Epstein, a senior computer scientist at SRI International. But in about half the states, email absentee ballot return is an option for members of the military and their families, along with some other U.S. citizens living overseas.
  • Wholesale hijacking of an online voting system. In 2010, the District of Columbia Board of Elections and Ethics tested an Internet-based voting system for a week, asking computer experts to probe it for flaws. It took only 48 hours for a team led by Halderman to break in and take control of the site – even altering it so that the University of Michigan fight song played after a vote was cast.

Read the University of Michigan researchers’ report on the DC hack (PDF)

In terms of illegally getting access to absentee ballots, Epstein said, the attacker or attackers who failed in Florida might have had an easier time with Washington state and Maryland.

He said that last summer he demonstrated to the FBI a method of changing individual voters’ addresses and other information online in those two states by predicting their driver’s license numbers.

J Pat Carter / AP file
bsentee ballots for the general election marked for delivery to the U.S. Postal Service for mailing are seen at the Miami-Dade County election center in Doral, Fla., on Oct. 5.

First he used publicly available information to gain a voter’s full name and address. Then, he predicted the individual’s driver’s license number – which is based on a combination of the person’s name and numbers and letters -- and used the information to access their voter registration online. From there, he said, he could have changed their addresses and had absentee ballots sent out.

“Imagine if (attackers) changed the address for 2,500 votes. It could be completely automated, and they have the ballots sent to a post office box or whatever,” Epstein said. “Then the registered voters would have no idea until they tried to vote.”

In October, Halderman and other researchers sent letters warning elections officials in both states of the danger of staking system security on driver’s license numbers.

The letter to Washington officials (read it here in PDF) also said that other security features in the state’s MyVote system would be only a speed bump to a dedicated hacker.

“Although the MyVote system uses a CAPTCHA, an image of distorted text intended to deter simple automated attacks, this provides only minimal defense,” the letter says. “Attackers can use commercial services to defeat the CAPTCHA at a cost of less than $0.001 per voter.”

Shane Hamlin, assistant director of elections in the Washington Secretary of State's Office, told NBC News that state election officials have acted on the recommendations in the October letter and will require additional information to register to vote or change registration online.

Maryland election officials did not immediately return a call from NBC News seeking comment, but the Washington Post reported last month that Ross K. Goldstein, deputy administrator of the Maryland State Board of Elections, acknowledged the security hole and said the online voter registration system was being updated to address the issue.

“I believe technology can solve problems, and there are steps that we definitely can, and plan to, take to mitigate the risks,” the newspaper quoted him as saying.

While elections officials are attracted to the savings that online voting and registration systems promise, the cost of guarding online registration and voting systems is large, Hoke said. And that might negate the financial advantage of online balloting touted by some elections officials and vendors who want to sell electronic voting products.

“It’s cheap, if you don’t care whether elections are stolen,” she said.

That possibility -- of an election being stolen through digital means -- haunts researchers. For Jefferson, it’s a matter of national security.

“The legitimacy of government depends on it being impossible for single parties to change the results of elections,” he said.

Power shift: Energy boom dawning in America

A worker walks from the 161-foot-tall rig to retrieve a tool from a nearby shed, Sunday, March 3, 2013, in West Texas.  

When this picture was made o...

Jim Seida / NBC News
A worker walks from a 161-foot-tall oil rig to retrieve a tool from a nearby shed outside Garden City in West Texas. When this picture was made on 

March 3, there were 1,752 rigs exploring for oil and natural gas in the US; 835 of them were in Texas. (Jim Seida / NBC News)
Randy Foutch calls it a renaissance, but when you listen to the veteran Texas oilman and others describe America’s nascent energy boom, it sounds more like a miracle.
Politicians have been warning for decades that the U.S. must wean itself from foreign energy, but just a few years ago their words seemed like so much wishful thinking: The U.S. was facing what seemed like ever-rising oil prices and was importing about 60 percent of its supply. Natural gas inventories were shrinking, and the country was considering importing a liquified form from the Middle East.

Power Shift
NBC News
America's drive toward energy independence
But in a turnaround that industry insiders describe as nothing short of amazing, the picture has drastically changed. Oil and natural gas drilling is now booming in places like Eagle Ford, Texas, and the Bakken formation in North Dakota, bringing jobs and prosperity to those regions. And believers say the newfound resource is so much bigger than anticipated that it can help drive economic growth nationwide for years to come.

“For the first time in my career, we actually have the ability to talk about real energy security or independence,” said Foutch, 61, a burly Texas native with four decades experience in the oil business.
Technological innovation – primarily the growth of horizontal drilling and hydraulic fracturing, or “fracking” as it’s commonly known – is driving the new production, enabling oil and gas to be extracted from geological formations once considered impregnable.

Infographic: How 'fracking' works

“The ability to drill these long-reach horizontal wells into reservoirs we could never reach before was a big change for the industry,” said Foutch, head of Oklahoma-based Laredo Petroleum.
As a result, U.S. oil and gas production is growing so rapidly - and demand dropping so quickly - that in just five years the U.S. may no longer need to import oil from any source but Canada, according to Citigroup. And the International Energy Agency projects the U.S. could leapfrog Saudi Arabia and Russia to become the world’s biggest oil producer by 2020. IEA sees the U.S. becoming a net oil exporter by 2030.

Narrowing the energy gap
NBC News

In a four-part series starting Monday and continuing over the next three weeks, NBC News and CNBC will examine how this boom occurred almost overnight and look at the implications that U.S. energy independence would have for the U.S. economy, other types of energy, foreign policy and the environment.
Horizontal drilling is not new but the widespread application of it is. When combined with fracking, which uses highly pressurized water and sand to break through rock formations, usually shale, and "stimulate" the movement of hydrocarbons, it has made recoverable billions of more barrels of oil and vast stores of natural gas.
“The key year was 2003,” said Daniel Yergin, vice chairman of the energy consulting company IHS, referring to the first use of horizontal drilling combined with fracking. “That was when it was proof of concept. So for five years, it unfolded quietly with the independents. In 2008, that’s when the majors got interested.”

In 2003, there were 1,900 horizontal wells operating in the U.S. IHS estimates there were closer to 45,500 in 2012.
That has led to forecasts that once sounded far-fetched becoming reality: U.S. oil wells produced 6.4 million barrels of oil per day last year – the highest domestic production level in 20 years -- and are expected to yield 7.3 million barrels per day this year, according to the U.S. Energy Information Administration. The EIA recently increased its forecast for U.S. oil production to 8 million barrels a day by the end of next year.
“One thing I can say with absolute certainty…is that our long-term forecasts are going to be wrong,” Adam Sieminski, EIA administrator, said in a recent speech. “It looks like the direction we’re going ... on oil is there’s going to be more of it.”
At the same time, the U.S. imported about 7.6 million barrels per day in February, a decline of 1.3 million barrels per day from the same time last year. And in 2012, U.S. oil demand – 18.56 million barrels per day -- was down 2 percent from the previous year and at its lowest level since 1996, the EIA said.
If those trends continue, Yergin said, the U.S. will largely be able to wean itself off non-North American oil sources within a decade.

Image: Oil and gas wells
NBC News
“The view I have is the U.S. will be a lot less dependent with Canada,” said Yergin, who also is CNBC's global energy analyst. “That will really reduce imports, combined with more fuel-efficient cars, reduce exports from outside North America. We’ll still be importing some but it’s certainly a rebalancing of global oil. That oil that was coming to the United States will go somewhere else and that somewhere else would be Asia.”
Canadian production is expected to increase to 6.5 million barrels per day, and even Mexico is now expected to join the North America energy renaissance under a new government interested in exploiting its resources, according to Citigroup research.
Since 2006, U.S. oil field production of crude, plus natural gas liquids and bio-fuels has grown by 3 million barrels a day, about the same as the total output of Iran, Iraq, or Venezuela. In the same period, Canadian production has grown by 510,000 barrels a day.
Citigroup analyst Edward Morse said in an interview that the U.S. could in theory need to import only from Canada within five years.

Is this for real?

Reports on the new oil and gas bounty have met with considerable skepticism. Some energy analysts are concerned that the new “unconventional” supply is limited and will be quickly tapped because some of the impacts of the new drilling are unknown and the history is so new.
The Oil Producing Export Countries, or OPEC, may have a competitive ax to grind, but in a recent release it questioned the U.S. forecast.
Others are worried that the drilling, most of which is occurring on private land, will create environmental problems and be blocked or stymied by new regulation. Still others fear that the phenomenon could lead the U.S. to export oil and gas, driving prices higher and squandering a rich resource.
But those with the most insight into production figures from what are known in the industry as “tight” oil and gas resources -- a term derived from the difficulty in recovering them from the rock formations -- say the critics fail to appreciate just how rich these fields are turning out to be.

Slideshow:Drilling down and out in Texas

“There’s a great expression in the oil business: ‘Oil’s been found where it’s been found before,’” said Scott Tinker, director of the Bureau of Economic Geology at the University of Texas. “These big oil- and gas-rich basins already are producing from the conventional reservoirs that leaked off of the shale. Most of these big basins … have rich source rocks."
"The source rocks are the kitchen where the oil and gas are cooked before they leaked out into the conventional reservoir," he added. "We’ve drilled the conventional reservoir. There’s still some to be drilled, but the kitchen is what we’re drilling now, and it contains a lot more oil and gas than what was leaked.”
Tinker leads a group that just completed a comprehensive survey of a major natural gas field, the Barnett Shale in Texas, and is now studying the Fayetteville Shale in Arkansas, the Haynesville-Bossier field on the Gulf Coast and beginning to look at the Marcellus, which extends through Ohio, Pennsylvania and New York.
He said that after the Barnett survey, which showed a cumulative 44 trillion cubic feet of recoverable natural gas reserves with production extending through the year 2030, he was more confident than ever about the supply.
The U.S. consumed 24 trillion cubic feet of natural gas in 2011 and Barnett supplied about 10 percent of that, the study said.
“It gives us tremendous confidence,” he said. “It’s real.”
That confidence is reflected in the most recent estimates of U.S. oil and gas reserves.

Interactive map:Where US energy is produced

Thanks to the new drilling techniques, an estimated 2,200 trillion cubic feet of recoverable natural gas in the U.S. – or a century’s worth -- and billions of barrels of oil are now believed to be locked in rock formations, spanning from California to Pennsylvania, according to the EIA.
The U.S. government estimated in 2010 that the U.S. had proven reserves of just 25.2 billion barrels of oil – or about four years’ worth at recent consumption rates. The “tight oil,” or unconventional oil supply, is believed to be double that amount, or about 58 billion barrels, according to John Staub, an analyst with the EIA.
That means the U.S. now is estimated to have total technically recoverable resources equaling 223 billion barrels when all potential offshore oil and in tight oil zones are taken into account, he said.
“In 2006, we were a little under 150 billion barrels, and it’s kind of just slowly grown over time,” said Staub of the technically recoverable oil. “The technology improves and changes our understanding of how much of the resource can be accessed.”
And that figure is likely to continue to grow, said Bob Dudley, CEO of the global energy giant BP, which in the last year has begun exploring in Ohio.
"At current consumption rates, the data suggests the world has 54 years' worth of proved oil reserves and 64 years' worth of proved gas reserves in place, and more will be found," he said in a recent speech.
While oil drilling is booming, the industry has reined in domestic natural gas production in recent years because the price is depressed, trading as low as about $3.60 per million BTUs on the NYMEX recently, way below its record high of more than $15 per million BTUs in 2005. But many experts say that will change quickly if the price starts ticking back upward or the costs of drilling decline, as anticipated by some industry forecasts.

Meantime, companies are benefiting from the abundance of oil and liquids found in some areas where they were looking for gas, and from being the global leaders in the use of new technologies that have made oil recovery a changed business.
Pete Stark, senior research director and adviser with IHS, said the new techniques already enable outfits to cut costs, save on logistics and reduce surface impact, and are continuing to evolve.
“The plan is that they’ll have one central drilling pad location for 3 square miles, and from that central drilling pad, they will drill six to eight horizontal wells in up to four different reservoir zones, going a mile and a half north, and the same thing a mile and a half south,” he said, projecting how new drilling techniques are likely to be extended. “In the future, if the maximum number of wells ... possible are drilled, you could have 64 wells from one pad covering 3 square miles.”
Stark, like others in the industry, said it's difficult for drillers to know just what they’re going to find. But in many cases, he said, wells are producing more than anticipated. For example, Stark noted, he estimated last year that the Three Forks area in the northern Bakken Shale had one reservoir. “Now it looks like an additional two or [three] lower reservoirs are also yielding commercial production,” he said, noting that could mean an additional 5 billion or 6 billion barrels.
Morse, head of global commodities research at Citigroup, credited independent oil and gas drilling companies with pioneering the rapid growth of the industry in the U.S. and Canada.
“The cost of entry is unbelievably low,” he said. “... What distinguishes this kind of drilling from drilling in deep water is a combination of factors, including the cost of the well. So the well, instead of being a $100 million, may be as little as a million, or as much as $10 million. If you’re looking at an offshore circumstance, development requires $50 to $60 dollars a barrel of oil, but (these operators’) costs are very low -- $10 or $15 a barrel.”
Morse was co-author of a report last month on the U.S. drive for energy independence, which predicted that the glut of domestic oil will lead the U.S. to move away from imports, a trend that could start with declining demand for West African crude as early as this summer.
He believes the shift could sharply reduce the price of oil, and therefore limit the revenues of the producing nations. Brent crude oil, the international benchmark, could trade in a new lower range of $70 to $90 per barrel by the end of the decade, down from its recent range of $90 to $120 per barrel, according to Morse.

Implications for U.S.

The already-low natural gas prices and anticipated decline in oil prices have many analysts projecting a ripple effect that will energize the long-moribund U.S. manufacturing sector. The Citigroup report, for examples, lists more than 30 companies expanding capacity in the U.S. because of cheaper energy.
Dow Chemical is on the list, and the company’s CEO, Andrew Liveris, is outspoken about his belief that cheaper energy can bring manufacturing back to U.S. shores. Yergin, the energy analyst, said the industry supports 1.7 million jobs, a number that he says could grow to 3 million by 2020.
Such rosy estimates rely on the industry being able to surmount both logistical challenges and concerns among environmentalists, particularly fears of water contamination, seismic activity and methane gas release from fracking.
The biggest logistical hurdle is that the U.S. has insufficient pipelines to handle the growing supply. The industry has turned to rail shipping to help transport its oil to refineries, and more than half the oil in North Dakota travels out of the state by train.
“Our logistical system needs to catch up with these new supplies,” said Yergin. “Five years ago, no one would have thought that North Dakota would be supplying oil to a refinery in Philadelphia.”
But efforts to build new pipelines invariably run into opposition from environmentalists and residents whose homes and property they would bisect.
The most high-profile battle recently has been over the Keystone XL pipeline, which would move crude from the Canadian sands to the Gulf Coast refineries. The plan to build the 1,700-plus-mile pipeline has drawn fierce opposition from environmentalists and some elected officials in the upper Midwest out of fears that a spill could contaminate the Ogallala Aquifer, which provides drinking water to 1.9 million people, according to the U.S. Geological Survey.
The fact that the dilute bitumen oil obtained from the so-called Canadian oil sands also requires additional energy to process has added to the outcry, said energy analyst John Kilduff of Again Capital.
“The extraction method utilizes natural gas so it’s a crude oil that has a much higher carbon footprint than normal and it’s the most corrosive type of crude oil, so the environmentalists do have some more arrows in their quiver to fight this, more than normal,” he said.
Kilduff said he expects the pipeline to eventually gain approval from the White House after the State Department on March 1 said it found no major environmental reason to block it.
But such concerns have some in the oil and gas industry urging caution as domestic production ramps up.
Tinker, who leads the group studying the obtainable natural gas reserves in the various shale areas, said the growth of hydrocarbon energy supply should accompany growth in alternative energies and be used in conjunction with wind, solar and nuclear.
“It’s part of a sensible energy portfolio,” he said of drilling shale wells. “...You look at nuclear, renewables, you look at hydro. It makes sense to keep your portfolio diversified. I think it’s important for policy makers and regulators and people investing in the industrial process to keep these things in mind.”
Foutch, the CEO of Laredo Petroleum, has the kind of brash optimism you’d expect from a Texan with a master’s degree in petroleum engineering from the University of Houston and a background as an amateur rodeo cowboy.
He said the horizontal drilling era presents the country with an important opportunity, and is one reason he’s still at the helm of Laredo after selling off two other drilling companies he founded, including one called Lariat.
“We thought we had two or three years of drilling opportunity captures in front of us, maybe four or five and that was a premium that other people would pay for and we sold the company,” he said. “At Laredo, we’ve captured, depending on how you want to look at the numbers, 20 years or 25 years of drilling inventory of what appears to be high-quality drilling potential.”
That’s not to say that America shouldn’t develop other forms of energy, he said, but it can’t afford to turn its back on one that is crucial to its future.
“The long-term answer is the most critical one,” he said. “We as a nation, we just won’t recognize that hydrocarbons are here to stay as an energy source and it’s a very high-quality energy source, and we can do all we want with wind, solar and algae. I hope all that stuff works. … The fact of the matter is we are going to be using hydrocarbons for some time to come.”
Patti Domm is CNBC Executive News Editor.
Coming nextMonday: Whatthe energy boom will mean for the overalleconomy