by Bill O'Connell on July 22, 2010
The Sherrod incident is the latest in a long line of shoot from the lip misfires from the Obama administration, from the president on down. Here is a review of some of the more egregious of them:
- President Obama, without waiting for the facts says the Cambridge, Massachusetts police department “acted stupidly,” in an incident involving African American professor Henry Louis Gates. A picture from the “beer summit” shows the president confidently striding toward the cameras while in the background Sergeant Crowley takes Professor Gates arm to help him negotiate the stairs, as Professor Gates walks with a cane. Racist?
- With 13 dead Americans at the hands of terrorist Nidal Hasan, Janet Napolitano comes out and claims, “The system has worked really very, very smoothly over the course of the past several days.” A few days later she would eat those ridiculous words.
- Not to be outdone by herself, after another terrorist attempt on our soil in Times Square, Secretary Napolitano quickly came out to label the attempt a “one-off” and the suspect a lone wolf. As the investigation picked up steam there were all sorts links to terror groups in the Middle East.
- When the president of Honduras tried to override term limits and become the next Hugo Chavez, the Honduran government enforced its laws against the changes that its president was trying to illegally implement. The Obama administration immediately labeled the legitimate actions of the democratically elected Honduran government a coup. Hillary Clinton’s State department cancelled the visas of all members of the Honduran Supreme Court. Not to be intimidated by Chavez, Castro, or Obama, Honduras stood its ground. The Congressional Research Service looked at the Honduran Constitution and the actions of its government and found that the government acted properly and within the law.
- When Arizona reached the end of its rope and could not get the Obama administration to enforce the law on the border, they passed a law to give their police greater flexibility to determine the legal status of people stopped for another police matter. The Obama administration immediately called the law unconstitutional. When asked if they read the massive 10 page law, that’s right 10 pages, both Attorney General Eric Holder and Secretary Janet Napolitano (yes, her again) both said they hadn’t read it before declaring it unconstitutional. This administration pushes through legislation running thousands of pages each and they can’t find time to read a ten page law before condemning it.
- Department of Agriculture employee Shirley Sherrod gave a speech to the NAACP where she spoke about her transformation from having a racial bias in a decision she made 24 years ago, to today where she tries to treat all individuals regardless of race. Only the first part of the story was headed toward the airwaves, the part about her past discrimination, and before the news hit the air she was fired by the Obama administration. Had they watched the whole tape before acting, they wouldn’t be swimming in apologies right now.
Is this just the lack of experience or does the Obama administration need adult supervision? They jump to these wild conclusions and then end up backtracking days later. After eighteen months in office you would think they would have learned by now how to govern.
Another case without as quick a trigger is the passage of the Dodd-Frank financial reform bill. After taking office President Obama appointed a commission, the Financial Crisis Inquiry Commission to investigate the root causes of the crisis. A prudent person might say, let’s hear what the commission finds out and then write legislation to address those root causes. With months more to go before that commission’s work will be done, we have another 2,000+ page bill coming out of Congress and signed by the president to put new regulations in place on the financial services industry. Why the rush? Wouldn’t it be better to fix the real problems rather than what Chris Dodd and Barney Frank think are the problems and let them paper over their own culpability in the creating the crisis? Why were Fannie Mae and Freddie Mac excluded? In one of the hearings before the commission an argument was made that AIG did not have to be bailed out, that there were measures in place to ride out the crisis and that in the long run their policies would be fine. Whether that is true or not, will have to wait for the final report, but the “just don’t stand there, do something,” mentality is disconcerting. I certainly hope we are never faced with another Cuban Missile Crisis with this team in place.
by Bill O'Connell on June 16, 2010
As President Obama used his first Oval Office address to push for another massive government takeover of our economy in the energy sector, it is time to debunk the myth regarding regulation versus free markets. The Statists like to claim that the financial crisis, the lack of health care, and the disaster in the Gulf are all proof that free markets are evil and we need the benevolent care of our federal government to keep us safe and warm.
Regulation
Let’s focus on the current crisis, the oil spill in the Gulf of Mexico. Here is the government’s role in this mess:
- Government has banned drilling on land (ANWR) and in shallow water of the coasts of California, Florida, the East Coast, while not only forcing oil companies to go into deeper water, but providing incentives to do so.
- The same agency of the federal government (MMS) is charged with both collecting royalties from the oil companies and for levying fines on them for violations of regulations.
- While drilling the Deepwater Horizon well, BP asked the government for several waivers of regulations, and the waivers were granted.
- After the spill started, Governor Bobby Jindal of Louisiana wanted to build sand berms to block the oil from reaching the cost, but the federal government wanted to study the problem and would not allow him to proceed.
- Foreign nations such as Norway, Holland, Belgium and Japan offered to provide ships to help clean up the oil in the Gulf, but U.S. law, the Jones Act of 1920, does not allow them to operate in U.S. waters. When asked why the government didn’t just suspend the Jones Act for this emergency, the government’s lead agent on the ground, Thad Allen, said, “Nobody’s come to me to ask for a waiver.” When Carol Browner, Obama’s energy advisor was asked why the administration did not lift the Jones Act said, “Nobody has asked us for a waiver.” Who are they waiting for to ask them?
- The government placed a cap on the amount of damages that a company would be responsible to pay at $75 million, which creates a moral hazard. That is, if I can make billions extracting oil and my out of pocket cost if I screw it up is $75 million, I’ll take shortcuts all the way.
- BP has said they are responsible for the oil spill, they will pay to clean it up, they will pay all legitimate claims resulting from it, even waiving the $75 million cap that the law allows. So why do our leaders use language like, keeping their boot on the neck of BP and knowing whose ass to kick? This is starting to cause a backlash in the U.K. which has resulted in comments such as, “The rest of the world is fed up with the parasitic attitude of the U.S.”
- The government starts making statements that they want BP not to pay a dividend to its shareholders or to put $20 billion into an escrow fund that the government will oversee and spend as they see fit and even to the point of putting BP into receivership. Who is our President, Hugo Chavez?
Free Markets
Let’s look at what would happen in a truly free market:
- Anyone wishing to drill for oil would be able to reap the profits from the well, but would also have full responsibility for the costs of any and all damages or cleanup. This may lead to less drilling if the venture is too risky, but that’s how markets work; it is a balance of risk and return.
- To help offset some of the risk, insurance companies could make a market in providing insurance for a disaster, but rest assured the insurance company would have their personnel inspecting the rigs to make sure all necessary risks were minimized and if not, jacking up the premiums or cancelling the insurance.
- Government regulation would be simpler in terms of setting standards of what quality of materials could be used, what redundancy must be in place to provide for any failures of primary systems, what levels of emergency equipment must be in place and what contingency plans must be prepared and tested to make sure they work. If an oil company doesn’t not have adequate insurance, drilling must stop until they do. If the oil company is out of compliance with a major safety issue, drilling must stop until it is corrected.
- When going into new areas such as deep water, the technologies to be used should be tested and independently verified to make sure they work as designed under the new conditions, and the insurance industry would be very much interested in participating in such testing, to minimize their risk.
- In the event of an accident, the government should lend all possible assistance to the oil company to stop the leak and clear the red tape for a cleanup effort and discuss responsibilities after the disaster is under control.
The end result would be more cautious companies because they could be wiped out if they cut corners. Insurance companies would have a second set of eyes making sure that things were done properly, because they make money when nothing goes wrong and are indifferent to whether any oil is recovered or not as long as the premiums are paid. The government would be out of the business of micromanaging the industry; providing incentives and penalties under the same agency; having key personal asking “mother, may I” before taking any steps, and we wouldn’t need a dozen agencies with overlapping responsibility trying to take control.
Free markets have incentives that do work. What is often complained about is the myth of a free market where the government has placed perverse incentives on companies and then act surprised when said companies follow the incentives. Their response is always more regulation with more perverse incentives and the cycle repeats. More government is not the answer, it is the problem.
