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The Wall Street Journal

Tim Bishop’s Business Ignorance Keeps Economy in Fetal Position

by Bill O'Connell on October 20, 2010

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Tim Bishop continually bashes his opponent on the topic of outsourcing jobs.  One of Mr. Bishop’s brilliant solutions, brilliant because it was conceived of in the halls of academia and Congress rather than at the helm of a company, is to raise taxes on companies foreign operations.

At the same time Mr. Bishop and his fellow travelers rail against businesses that are sitting on piles of cash rather than hiring and investing.  Since he probably doesn’t know how to read a balance sheet, I will enlist the aid of John Chambers, CEO of Cisco Systems and Safra Catz, President of Oracle who spell it out in the Wall Street Journal.

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Tim Bishop’s Big Fat Zero

by Bill O'Connell on October 14, 2010

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Tim Bishop has one reason that he consistently gives for sending him back to Congress and that is that his opponent, Randy Altschuler, started a company and Bishop claims it outsourced jobs overseas. 

In a New York Post article yesterday, Raymond J. Keating informs us  that the Small Business & Entrepreneurship Council, where he serves as chief economist, just released their Small Business Scorecard for the 111thCongress.  The scorecard rates members of Congress on a wide range of votes (27 in the Senate and 22 in the House) that cover such things as workplace regulation, ObamaCare, government spending, tax policies, energy legislation, and bailouts.  Overall, he tells us the New York delegation scored just 11 percent on the scorecard, the sixth worst of the fifty states.  The two members of the delegation that scored well are Peter King, and John Lee.  On the other hand Tim Bishop failed to vote even once with small business on big issues.  A big fat zero.

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BP Spill Panel: Obama Administration “Not Fully Competent”

by Bill O'Connell on October 7, 2010

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As they say, when it rains it pours. The Obama administration famously boasted about having its boot on the neck of BP and extorting $20 billion from the company without the benefit of due process, but now a different assessment emerges.

According to a report in the Wall Street Journal, the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, faulted the administration on several fronts. “A White House spokesman didn’t immediately respond to a request for comment.”

It is quite clear that this administration stumbled and bumbled along at the start of the disaster, once again fully displaying its inexperience in executive matters. Here are some of the salient points from the commission.

  • “A sense of over optimism” about the disaster “may have affected the scale and speed with which national resources were brought to bear.”
  • In addition, the government’s underestimate of how much oil was flowing into the Gulf of Mexico gave the impression that the government “was either not fully competent to handle the spill or not fully candid.”
  • The administration took “an overly casual approach” in calculating that between 1,000 and 5,000 barrels per day were flowing when the real number was around 35,000 to 60,000 barrels per day
  • Their initial low estimate remained the official estimate for a full month
  • The administration was initially slow to respond and then misdirected resources when the public grew increasingly frustrated with the lack of progress.

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Obama and Carter: Mayday! Mayday! Mayday!

by Bill O'Connell on September 22, 2010

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The imagery in my mind was triggered by an editorial in the Wall Street Journal by John Fund, when he described Obama in a “political tailspin.” Close your eyes and picture the pilot Barack Obama screaming, “I’ve never flown a plane before!!!” as he furiously toggles switches and twists dials.  Biden in the co-pilot seat is flipping through a copy of Piloting for Dummies, shouting back, “Neither have I.  I always sat in the back!!!”  At the same time, Jimmy Carter is trying to calm Obama down and talk him through pulling plane out of its deadly dive while muttering as an aside, “It’s all Fox News fault.”  Then together they all scream, “WE’RE ALL GONNA DIE!!!!”

Such is the political landscape this bright Wednesday morning.  The sky is clear here in New York, but politically it is anything but that.  The news came out yesterday that the recession ended eighteen months after is started in December 2007.  That means it was about five months after Obama took office and just three months after the massive stimulus package passed, which means the economy recovered on its own, without the stimulus.

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New York Republican Primary Endorsements

by Bill O'Connell on September 13, 2010

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Tomorrow is the New York State Republican Primary.  We go to the polls to choose our candidates who will go up against the Democrats in November.  This is an important election and an important turning point for our country.  New York is a deep blue state and the Republican party seems to be part of the problem rather than part of the solution.  The candidates that they often put forth are more likely to make Republicans throw up their hands and stay home on election day than turn out and vote. 

We have seen the hope and change of the Obama administration and it scares the hell out of many Americans.  The change we need is to turn out the “go along to get along” crowd and put in true reformers.  At Tea Party meetings I encounter more and more New York conservatives who say they are tired of hiding their beliefs.  They used to keep their political views to themselves because they feared repercussions from their employers, their customers, their schools, but they are tired of it.  They tell me they are coming out of the closet.

We need to embrace this view.  It may mean we lose some races like the special election in New York’s 23rd Congressional district, where the Republican bosses picked Dede Scozzafava, who after falling behind Doug Hoffman, the Conservative candidate, in the polls, dropped out and endorsed the Democrat.  It is time to stand and be counted.  Liberty’s Life Line makes the following endorsements.

New York’s First Congressional District

In New York’s First Congressional District, Liberty’s Life Line endorses Randy Altschuler. Randy came out early and often to challenge incumbent Congressman Tim Bishop and Speaker Nancy Pelosi on their reckless spending.  He has articulated a conservative view on the major issues that we face and he is a free market conservative.  Christopher Cox has a number of positions that are similar to Randy Altschuler, but instead of focusing on explaining how he would govern and why he is the better candidate, he chose the low road to attack his fellow Republicans in a mudslinging campaign that angered numerous voters.  Mr. Cox also promotes a protectionist point of view,  rather than a free market point of view and he seems confused about what the job of Congressman entails.  In one of his ads he talks about putting Suffolk County taxpayers first.  If he were running for County Executive, that would be fine, but a Congressman cannot put his constituents ahead of any other taxpayers.  Federal tax laws should affect all Americans equally, and where they don’t they should be changed so that they do. 

George Demos’ campaign is verging on the desperate.  His positions on his web site are little more than platitudes and he has chosen to make the centerpiece of his campaign social issues that are not what the majority of the voters are concerned about right now.  We are heading toward a debt crisis, and Mr. Demos oddly chose to run on an issue that will let the incumbent change the subject from the economy.

New York Senate versus Kirsten Gillibrand

Liberty’s Life Line endorses David Malpass for United States Senate for the seat currently held by Kirsten Gillibrand.  Mr. Malpass has more experience at the federal level having worked in the Reagan administration.  He also understands that New York has, for years, paid more money in taxes to Washington than New York has gotten back in government money.  Yet every year Sentators Schumer and Gillibrand vote for more spending and more programs that New Yorkers will fund and others will reap the rewards.  Mr. Malpass understands that the answer is not to fight for a bigger share of the pie for New York, but to shrink the pie and eliminate unnecessary programs and spending.  Mr. Blakeman has relied more on imagery in his campaign and attacks on Mr. Malpass rather than focusing on how he would govern and therefore be the best choice for the Senate. Mr. DioGuardi seems to advocate the same old ways of doing business.  For example, he advocates “Paygo” which was the tool Democrats invented to force tax increases as new programs were added to the economy and which the Wall Street Journal described as “kind of budget gimmick that gives gimmickry a bad name.”  We need straight forward shrinking of government not better tools to monitor how badly it is being done.

New York Senate versus Chuck Schumer

Liberty’s Life Line endorses Jay Townsend for United States Senator for the seat currently held by Chuck Schumer.  Both Mr. Townsend and Mr. Gary Berntsen have strong national security views, are for tax reduction and reduced spending.  Mr. Townsend’s positions seem to be more thoroughly developed.  For example, he is for the repeal of ObamaCare and in its place he supports some common sense methods to reduce the cost of delivering health care without spending $1 trillion.  Mr. Berntsen doesn’t address health care on his website.  Mr. Townsend also has pledged to ban all earmarks, which are basically the way incumbents bribe their constituents to send them back to Washington.  Replacing Chuck Schumer will be a tough challenge so we need to put forth the best candidate we can.

New York State Governor

Liberty’s Life Line endorses Rick Lazio for governor.  Although Carl Paladino has captured the anti-incumbent energy and had energized people to come out and support him, Rick Lazio has a concrete plan on how he would attack the issues.  New York State government is so broken, Life Line could see that an outsider like Mr. Paladino could just be hamstrung and stalled by a legislature that is vehemently opposed to him.  Think Arnold Schwarzenegger in California, who came in on a re-call election to turn things around but ended up being the one turned around.  Mr. Paladino, as a CEO, is coming from an environment where he calls the shots, in Albany he will have to work with the legislature to get things done and it will take him a little while to figure out what buttons to push.  Mr. Lazio has legislative experience as a Congressman, and has thought through his plan in sufficient detail that it might actually work.  Mr. Paladino has moved the debate which is a major victory and if he loses the primary Life Line hopes he will support Mr. Lazio.  Likewise, if he should prevail, we all must get behind him to defeat Mr. Cuomo in November.

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Pretty Weak Tea

by Bill O'Connell on September 3, 2010

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There is an increasingly nasty battle brewing in the Republican race for the nomination to run against Democrat incumbent Tim Bishop in the First Congressional District in New York.  With jobs and the economy the number one issue across the nation, the petty personal attacks may result in potential Republican voters staying home in disgust.

In an excellent article in the Wall Street Journal titled, “New York’s GOP Never Learns,” Kim Strassel concludes her article by saying, “The effect has been to enrage and divide a New York party that should have bigger things on its mind. Say, winning this fall.” 

Chris Cox is trying to play catch-up to the front runner Randy Altschuler who has been actively campaigning for more than a year.  The difficulty for Mr. Cox is that his positions are not that different than those of Mr. Altschuler.  So, while Mr. Altschuler has been taking on the Democratic incumbent Tim Bishop and Bishop’s lockstep voting with Nancy Pelosi, Mr. Cox has resorted to attacking Mr. Altschuler.  Not to leave his flank unprotected, Mr. Altschuler has been forced to respond and now the race, with two weeks to go before the primary on September 14th, has degenerated into a mudslinging contest.  There is a third candidate, George Demos, who is lobbing attacks from the rear with little effect.

Each candidate is calling themselves the “true conservative,” and Mr. Cox has garnered the support of the Suffolk County 9-12 Project the self-proclaimed “Largest Tea Party organization in Suffolk County.”  Mr. Cox’s father, Ed Cox, is the head of the New York State GOP.  Ms. Strassel reports that the senior Mr. Cox, backed Steve Levy over Rick Lazio for governor to curry favor with the Suffolk County GOP chairman to back his son.  It is all the kind of backroom political dealing that have attracted a rush of newcomer candidates and put incumbents of both parties on the endangered species list.

The Tea Party Endorsement

 

What caught my eye was the endorsement of the Suffolk County 9-12 Project and the announcement by Bob Meyer, co-founder.  He gave as one of his primary reasons that, Randy Altschuler was one of those people, “getting rich off the backs of hardworking Americans by outsourcing their jobs.”  That sounds more like Jimmy Hoffa, Andy Stern, or Barack Obama’s class warfare than any Tea Partier I know.  A commenter on the 9-12 Project’s site, Judyann Joyner added, “Randy is credited with the creation of ‘white collar sweatshops in India.’”  Pretty strong stuff.  I don’t know if Ms. Joyner or Mr. Meyer visited the company that Mr. Altschuler co-founded in India, but Business Week magazine did.

“The lights burn day and night in the gleaming glass-and-chrome building that towers over a leafy street in the southern Indian city of Madras. Here at OfficeTiger, 1,500 young men and women peer into computers 24 hours a day, analyzing and processing U.S. Securities & Exchange Commission reports and other documents drawn up by lawyers and bankers on Wall Street. Walking the floor, sometimes even at 3 a.m., is 34-year-old co-founder and co-Chief Executive Joseph Sigelman.”

Just because the office operates 24 hours per day, don’t be conned into thinking the same people are at their desks 24 hours a day.  “Gleaming glass-and-chrome building that towers over a leafy street,” yup, sounds like a hellhole to me.  Business Week added, “Indeed, OfficeTiger is the only successful startup in India’s $5 billion outsourcing industry that is owned and managed by a U.S. entrepreneur.”  So we have an American company making money in India, in what seems to be a rather large and competitive field, and this is a bad thing?  Since when did conservatives turn into protectionists?  But what about the jobs they replaced?  Okay, let’s examine that. 

You have some Wall Street firms that are in a competitive business.  A young entrepreneur comes up with an idea to reduce operating expenses by having an external company handle routine clerical tasks that are not one of the firm’s key competencies, that is, people don’t buy that firm’s services because of their typing skills.  The company outsources and reduces costs.  By reducing costs, they prosper and grow; by growing they create more high skill jobs like lawyers, accountants, financial analysts, IT people, etc.  Perhaps even some of the former typists, because of their computer skills can move up the ladder to spreadsheets, and databases.  Do some people lose their jobs, yes, just as buggy whip makers lost their jobs when the automobile came on the scene.  Okay, let’s shift to India.

In India white collar jobs are created; their standard of living improves; they buy consumer goods like iPods and iPhones and their offices need sophisticated IT equipment from companies like Cisco Systems which grow companies like Apple and Cisco creating jobs in the U.S. We live in a global economy and if we want prosperity and peace, the best way to get there is through free markets.  Even Mr. Cox in the policy section of his website blames government policies for companies outsourcing jobs overseas.  If it is the government’s policies that make these jobs uncompetitive here and Mr. Cox knows it, why is Mr. Altschuler wrong for reacting to it and helping American companies that use these services remain competitive?

After selling Office Tiger to RR Donnelly, Mr. Altschuler started another company in the U.S., CloudBlue, that recycles old IT equipment.  So we have an entrepreneur that has started a couple of companies that have created jobs around the world and that makes him a villain?  Perhaps Mr. Meyer should go back and read some of the quotes on his own website:

“You cannot legislate the poor into freedom by legislating the wealthy out of freedom.” – Dr. Adrian Rogers

“I have a right to life, liberty, and the pursuit of happiness.” – Thomas Jefferson

Mr. Meyer’s key criticism of Mr. Altschuler smacks of the government picking winners and losers.  This business is okay, but not that one.  If your business creates jobs overseas that is bad, but if it creates jobs here it is okay.  Well, Mr. Altschuler has done both and he has firsthand experience doing so, which is what we sorely lack in Washington.  If the strategy of Mr. Cox continues, including creating another party, the TaxPayer party, to run on and split the vote further, Mr. Cox might as well mail his strategy over to the Bishop campaign as I am sure they will find it very useful in the general election.  Not my cup of tea.

The focus should be on defeating the out of control spenders in Congress who got us into this mess, not fighting each other to the death and let the incumbent waltz back into office.  The time is now.  Mr. Cox should focus on what he would do as a Congressman that is better than Tim Bishop and Mr. Altschuler.  If he can’t articulate that, he should drop out.  He is not going to win a lot of support by throwing mud at his fellow Republicans.

Note: In the spirit of full disclosure I have done some volunteer work for the Altschuler campaign

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So Called Conservatives and Birthright Citizenship

by Bill O'Connell on August 18, 2010

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A recent article in the Wall Street Journal, newly elected Republican Congressman from Hawaii Charles Djou called Birthright Citizenship a GOP Achievement.  And to think I was happy to hear Mr. Djou was elected in an unusual special election where he ran against two Democrats simultaneously.  They split the vote and he won.  Birthright Citizenship is not a GOP achievement it is an accomplishment of judicial activism, pure and simple.  Mr. Djou says, “The Citizenship Clause of the Constitution’s 14th Amendment provides that a person born in the United States is automatically a citizen, regardless of the race, ethnicity or citizenship of his parents.”  Where the hell does it say that? 

The Amendment actually reads, “All persons born or naturalized in the United States and subject to the jurisdiction thereof, are citizens of the United States and of the state wherein they reside.”  These, so called conservatives, like the first part of the clause but seem to go ignorant or blind at the second part.  If you are a Constitutional Originalist, you look to the meaning of the Constitution first in the actual text, then to any information that you can glean from what was discussed at the time of its passing.  This is a case where that information could not be any clearer.

Senator Jacob Howard of Ohio was the author of the citizenship clause of the 14th Amendment.  He said:

 “[E]very person born within the limits of the United States, and subject to their jurisdiction, is by virtue of natural law and national law a citizen of the United States.  This will not [emphasis added] , of course, include persons born in the United States who are foreigners, aliens, who belong to the families of ambassadors or foreign ministers accredited to the Government of the United States, but will include every other class of persons.  It settles the great question of citizenship and removes all doubt as to what persons are not citizens of the United States. “

How much clearer could “not include aliens” be?  Aliens are outside the jurisdiction of the United States and are subject to their home country.

Linda Chavez, who presents as her conservative credentials that she served in the Reagan and Bush administrations, points to English Common Law as the basis of the Birthright Citizenship.  Since under Common Law you are immediately and forever a citizen of the place of your birth.  However, with the Declaration of Independence we did away with that custom of English Common Law.  Under Common Law, you could not renounce your citizenship, and if we are still under that law, we are still all Englishmen.  It was also one of the causes of the War of 1812.  The British did not recognize our process of Naturalization.  They were stopping our merchant ships and taking off sailors they deemed to still be English citizens and pressed them into service in the Royal Navy.  The concept that Ms. Chavez is arguing supports Birthright Citizenship is from feudalism, where the serfs belonged to the land.  They received the lord’s protection and in return gave their lord a lifetime of service.

At the time of passage of the 14th Amendment, whose purpose was to grant citizenship to the freed slaves, the debate was whether it would also confer citizenship on the American Indians.  Under Mr. Djou’s logic and Ms. Chavez’s they were born here, it was automatic.  But it wasn’t.  Not because of discrimination but because they were members of their tribes which were considered sovereign nations.  The United States signed treaties with them.  In the Supreme Court case Elk v Wilkins the court ruled:

“Indians, born within the territorial limits of the United States, members of and owing immediate allegiance to one of the Indian Tribes, an alien though dependent power, although in a geographical sense born in the United States, are no more born in the United States and ‘subject to the jurisdiction thereof’ …than the children of subjects of any foreign government born within the domain of that government, or the children, born within the United States, of ambassadors or other public ministers of foreign Nations.”

That was the law until 1898 in the Supreme Court case United States v Wong Kim Ark, where the majority used the Common Law argument to ignore what was written in the text of the Amendment, what was discussed at the time of the Amendment by the author of the Amendment and its supporters and the prior Supreme Court case.  This is judicial activism at its baldest.  In the dissenting opinion by Chief Justice Fuller he made it clear:

“when the sovereignty of the Crown was thrown off and independent government established, every rule of the common law and every statute of England obtaining in the colonies, in derogation of the principles on which the new government was founded, was abrogated.”

The American Revolution did away with that definition of Birthright Citizenship under the Common Law.

So along comes Lindsey Graham, who can’t decide if he is for open borders or against them, so his suggestion to amend the Constitution to end Birthright Citizenship sounds somewhat hollow.   It is also irrelevant.  Article I, Section 8 of the Constitution clearly grants the Congress the power “To establish an (sic) uniform Rule of Naturalization..”  This does not require an amendment, just a simple clarifying law that Birthright Citizenship does not exist in the United States.

The irony is that the 14th Amendment was created to make it more difficult for future Congresses to repeal the Civil Rights Act of 1866, which said pretty much the same thing as the 14th Amendment and it was changed with the stroke of the pen of an activist Supreme Court.  Perhaps we need to consider the idea of Mark Levin in that perhaps we need to have a legislative veto of Supreme Court decisions.  If the role of the Supreme Court is to interpret laws written by Congress, why not let Congress with a two-thirds vote, explain what the Supreme Court misinterpreted?

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First Hearings for the New Congress

by Bill O'Connell on August 3, 2010

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Republicans have to learn to stop fighting by the Marquis of Queensbury rules, while Democrats, bite, kick, pull hair, scratch and hit below the belt.  Yes, Christ told us to turn the other cheek, but he also overturned tables, formed a whip out of cords and drove the money changers from the temple.  In other words, sometimes you have the hit the bully hard between the eyes before he learns to stop being a bully.

So if the Republicans regain control of Congress in November, they should open the new Congress in January with detailed hearings on what happened to Fannie Mae and Freddie Mac and don’t pull any punches.  By that I mean if they need to put Andrew Cuomo in the witness chair, even if he is the governor of New York, which he probably will be, then they should do so.  It’s time to stop playing patty-cake.

For all the hoopla of the Dodd-Frank Act, Fannie Mae and Freddie Mac were left out of the new regulations.  Oh, we’ll get to those later.  Okay, let’s get to them with the Republicans in charge.  Let’s expose how it was our government that got us into the housing mess and let’s do this before the Democrats re-write history and paper over their culpability in the greatest financial crisis since the Great Depression.  It’s time to put the big lie to “it’s all Bush’s fault and Republican policies.”

The papering over has already started by none other than Franklin Raines the former head of Fannie Mae who received bonuses of over $90 million while at the helm of Fannie Mae and was also charged with cooking the books that helped him receive those bonuses.  He reached a settlement with the SEC and gave back about $1.8 million from the profits in the sale of Fannie Mae stock and gave up $5.3 million in future benefits related to his pension.  But he essentially kept the rest, what the Wall Street Journal called a “paltry settlement.” 

Mr. Raines claims the demise of Fannie Mae and Freddie Mac, to which taxpayers have already coughed up $145 billion, was due to bad credit decisions made after he left the firm.  To put it in his own words:

 “The Journal had been warning for years that the on-balance sheet portfolios of Fannie and Freddie would lead to their demise. Mr. Carney suggests that excessive leverage was the culprit. Unfortunately, neither of these were involved. Nope. Just bad credit judgments. Decisions made, by the way, while operating under close regulatory scrutiny.”

According to the Wall Street Journal “What he doesn’t say is that Fan and Fred had a political and legal mandate to support low-income housing.”  To meet this mandate which had increasing goals each year, Fannie and Freddie had to cast a wider net to find these borrowers and the wider they cast the net the lower their standards had to be.  Thus more creative types of mortgages were created to lower the bar such as, interest only loans.  This scheme would continue to work as long as housing prices kept rising but that could not go on forever.  When the music stopped a lot of people were left standing without chairs and we all lost.  People’s credit ratings were destroyed, mortgage securities were worth far less than face value, people walked away from houses, and taxpayers were forced to pick up another “too big to fail” enterprise.  By the way, where in the Constitution does it authorize the federal government to get involved in helping people buy houses?

The secret veil put in place by the main stream media has been lifted.  With the Internet and the bloggers and cable television and talk radio, the main stream media can no longer keep information that does not comport with their agenda hidden from the American people.  The American people are energized and informed but that may not last long after the election, if we don’t continue to engage them.  Uncovering the true “swamp” that is our federal government and draining it should begin by letting the sun shine in.  So let’s do away with the good ol’ boy politics of not rocking the boat when you gain control so that they won’t rock the boat when they get it back.  If we don’t have a new class of non-incumbents who are willing to go to Washington and clean it up, really clean it up, we need to get rid of them and put new people in their place.  If that means replacing Republicans with better Republicans or Democrat incumbents with better Democrats, so be it.  We have to end the process of only being able to choose between two pathetic life time politicians who have never lived in the real world.

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Here Come the Dodd-Frank Unintended Consequences

by Bill O'Connell on July 23, 2010

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The rush to push through the Dodd-Frank Act, unread by those who voted for it, is working to bring the greatest economy on earth to a grinding halt.  Here is exhibit A.

The Wall Street Journal reported that The Ford Motor Company wanted to issue bonds that were backed by packages of auto loans, but had to pull the issue because of the new Dodd-Frank Act.  Dodd-Frank requires that issuers include credit ratings in its offering documents, that is, it has to disclose what credit rating agencies such as Moodys, Standard and Poors, and Fitch say about the quality of the bonds.  Those rating agencies, however, have refused to allow companies like Ford to use their ratings in their offering statements because  the Dodd-Frank Act now holds them legally liable for the quality of their ratings.  In other words, if those credit rating agencies say the bonds are high quality, and it later turns out they don’t live up to that rating, the rating agencies could be sued for damages.  This has brought the $1.4 trillion asset-backed securities market to a standstill.

Ratings companies argued that the new law effectively would render them “experts,” which brings with it potential new liability akin to those held by auditors and lawyers.

“The inclusion in the offering documents are an unacceptable risk,” Dan Curry, president of DBRS Inc., a bond rater, said. He said the expert liability is “really the standard for an auditor” and shouldn’t be used for rating agencies, since their opinions are “an attempt to predict future outcomes.” – WSJ, July 21, 2010

Gee, how long did that take to gum up the economic works?  Less than twenty-four hours.  This legislation was rushed through without waiting for the report from the Financial Crisis Inquiry Commission to tell Congress what the root causes were so, perhaps like grown-ups, they could actually craft legislation that would address the root causes rather than hamstring the economy.

The Securities and Exchange Commission just issued a six month waiver to the requirement that credit ratings must be included in bond offerings.  That should give us enough time to send all these overpaid progressive chowderheads packing and reclaim our country.

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Government Fails Again

by Bill O'Connell on June 21, 2010

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An in depth article in the New York Times titled, “Lapses Found in Oversight of Failsafe Device on Oil Rig,” covers at length the problems surrounding the technology and methods employed to prevent the disaster that we see every day on our television screens, newspapers, and the Internet.  It also points to the nearly complete lack of oversight and enforcement by the federal government to protect us.  Politicians like to write legislation and put flowery titles on the same and gather for the cameras for signing ceremonies, but when it comes to the heavy lifting of enforcing the laws put in place they often fall down on the job.

When disaster strikes the typical Washington reaction is to add more regulations that eventually become so complex and contradictory that compliance becomes nearly impossible (e.g., Internal Revenue Code).  In the case of the oil spill in the Gulf the article points out that studies were conducted in 2003, seven years ago, on failure points to prevent the situation we are living with today, but no requirements to put them in place or test them were instituted.

The article focuses on a device called a blind shear, whose purpose is, in the event of an accident like what happened on the Deepwater Horizon, to activate a pair of shear blades to cut the pipe that rises from the well and seal the well shut.  The reliability of single blind shears has only proved to be about 46%.  With this empirical data, new wells are installing two such devices for redundancy and backup.  Such a recommendation was made to the Materials Management Service (the government agency regulating drilling) in 2001, nine years ago, but the MMS took no actions on the recommendation.  In 2003, the MMS received a recommendation that would require the necessary underwater robots and testing of emergency backup systems, but again the MMS, demurred.  The practice has been that the MMS simply took the drilling industries word that they were taking steps to prevent problems.

In 2003, the Deepwater Horizon rig has a problem in a storm that caused the rig to break away from the well it was drilling, the blind shear worked perfectly in that case giving the company a false sense of confidence in the technology.  What happened next is revealing:

The following year, BP opted to remove a layer of redundancy from the blowout preventer. It asked Transocean to replace one of the blowout preventer’s secondary rams with a “test ram” — a device that would save BP money by reducing the time it took to conduct certain well tests. In a joint letter, BP and Transocean executives confirmed that BP was aware that the change “will reduce the built-in redundancy” and raise Transocean’s “risk profile.” – New York Times, 20 June 2010, pA1

Since the MMS did not require two blowout preventers, BP was in the clear to remove one.  Also, consider the term “risk profile,” and think of this in terms of a free market where insurance companies played a role.  If you increased the risk profile and didn’t want to have your policy canceled in its entirety for hiding that fact, the insurance company would no doubt increase BP premiums for the increased “risk profile.”  Since this effort was a cost saving measure, having to pay more in insurance might have changed the equation such that BP would leave things as they were with two blowout preventers.  But the government encouraged deep water drilling, the government put a cap on the amount of damages that a drilling company would have to pay that created a moral hazard, the government ignored recommendations to required greater safety measures and the government was lax in enforcing those regulations it had in place, instead relying on taking the industry’s word that all was well.

On a separate issue regarding the cleanup, in an article in the Wall Street Journal titled, “The President Does a Jones Act,” it states that in the two weeks following the disaster, thirteen countries contacted our government offering assistance with the clean up.  Our government turned the offers down.  As the State Department put it:

“While there is no need right now that the U.S. cannot meet, the U.S. Coast Guard is assessing these offers of assistance to see if there will be something which we will need in the near future.” One month later, many of these offers are still outstanding. – Wall Street Journal, 19 June 2010

The Belgians reportedly have the ships and technology that could clean up the mess in the Gulf in one-third the time than is currently estimated.  All it requires is suspending the Jones Act of 1920.  Bush did it almost immediately in the wake of Hurricane Katrina so that foreign ships could come in and provide temporary housing for the hurricane victims.  Officials in the Obama Administration weakly respond that “no one has asked them yet,” to suspend the Jones Act.  What are they waiting for?  Doesn’t Obama and everyone in his administration to hit the Sunday talk shows tell us that they has been on top of this since day one?  One plausible reason for the hesitation is that it might offend the maritime unions. 

We are continually told by this administration that we need more government expertise telling us how to run our lives.  Surrender your liberties, we’ll take care of you.  I don’t think so.  What do you think?

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