On the Contrary

This Sunday there were a couple of themes that came out in the Sunday News shows and the editorials that I think are worth reiterating here.  The first has to do with how the Republicans have campaigned, who they are campaigning to, and the second has to do with our economy, its fix, and its future.  Let’s start with the Republicans.

David Brooks, the conservative, opined in “Ceding the Middle”, that modernizing the Republican party was critical to a win and that John McCain “…never escaped the straightjacket of a party that is ailing and a conservatism that is behind the times. And that’s what makes the final weeks of this campaign so unspeakably sad.”  David is arguing that there is still great value in conservative values, but that by not modifying their approach to the challenges of today, the party missed a major opportunity to revamp and revitalize the Republican Party.  He still thinks John McCain would be a great president, but I would argue that if he couldn’t lead his own party out of yesteryear, how would he lead the nation out yesteryear.  But the real question here is that if you are appealing to old tired out ideas, just exactly who is your base who thinks these ideas work?

Without the blinders of conservative philosophy, Timothy Egan opined in “The Party of Yesterday”  that the Republicans have focused their whole approach on the less intelligent and ignorant of our population. A recent study identified the most educated cities in our nation based upon percentage of college graduates:

“Among the top 10, only two of those metro areas — Raleigh, N.C., and Lexington, Ky. — voted Republican in the 2004 presidential election.  This year, all 10 are likely to go Democratic. What’s more, with Colorado, New Hampshire and Virginia now trending blue, Republicans stand to lose the nation’s 10 best-educated states as well.”

Is this the less American parts of the country that Sarah Palin refers to?  The point here is very simple.  The Republicans have a campaign focused on anti-intellectualism, jingoism, and a fear based appeal by claiming we are moving to socialism, elitism, and consorting with terrorists.  They have not argued effectively on the issues and have focused on character instead to appeal to our less educated citizens.  I think the conclusion is obvious.  When your conservative philosophy for our future doesn’t really address the challenges we face, all you have left is to try appeal to those who don’t think deeply about the issues and react to fear.  Hopefully this election will be  a referendum on that kind of thinking.

The other theme was about what kind of an economy will we have for the future.  With the nationalization of the banking industry are we moving toward a much more nationalized capitalism?  Although conservatives see the need for strong intervention now, they would prefer far less government control and say in how banks operate.  But after the bank failures in 1929 and the reforms that were instituted to prevent such a catastrophe again, we forgot those lessons in conservative pushes to get government out of the markets.  The real issue here is when does government intervention limit the necessary risk taking that is the hallmark of a vibrant and innovative economy.  Thomas Friedman opined in “If Larry and Sergey Asked for a Loan”  that we need to regulate but in a careful and thoughtful way:

“Bottom line: We must not overshoot in regulating the markets just because they overshot in their risk-taking. That’s what markets do. We need to fix capitalism, not install socialism. Because, ultimately, we can’t bail our way out of this crisis. We can only grow our way out — with more innovation and entrepreneurship, which create new businesses and better jobs.”

The point here is that the world has changed and even progressives see how the market place is critical to our recovery and we must strike a balance.  But note a balance is a far cry from the conservative dogma of laisse-faire capitalism.  But I think the most important comment about where our economy is going was made by Paul Krugman in his editoral, “Desperately Seeking Seriousness”.  In this piece, Mr. Krugman opined that the Republicans were running a frivolous campaign and it was working until the economy focused the voters on serious issues.  He closed his editorial with this:

“Will the nation’s new demand for seriousness last? Maybe not — remember how 9/11 was supposed to end the focus on trivialities? For now, however, voters seem to be focused on real issues. And that’s bad for Mr. McCain and conservatives in general: right now, to paraphrase Rob Corddry, reality has a clear liberal bias.”

The point here is that we can always go on doing stupid things if they don’t have consequences that are immediately felt.  But reality has focused us on our economy and the market system as it has been working in this country.  The market place of the future will not be the market place of the past if we are to regain our leadership in the world.  It will be a market place that does have a liberal bias, but also as Mr. Friedman points out, a market place with “smart regulation”.  This is not a world for slogans and conventional wisdom, but for well thought out policies for our future.  These are not the voters that the Republican’s have targeted and is why they will lose because they are not thinking deeply about where we are going or presenting policies that can address our challenges.

Congress will be considering a bill to allow offshore drilling this week and there is a lively debate going on about its merits.  We have seen the battle lines drawn and then we have seen the Democrats move the battle lines.  There was the chant at the Republican Convention of drill, baby, drill.  That was the anti-intellectual side of the argument of the Republicans on display.  There was no cost/benefit ratio considered.  What was on display was pure hatred for anything Democratic.   It was a poke in the eye aimed at Democrats, not any considered facet of the policy or honest intellectual disagreement of that policy.  It was a raw look at Republican faith in their conservative philosophy, the arrogance of their perceived superiority, and their distain for anything appearing to be intellectual reasoning.  But there have been some considered opinions on both sides, and they are worth looking at.

The first is “One if by Land, Billions if by Sea”, an op-ed piece in the New York Times by David Abraham who oversaw offshore drilling the White House from 2003-2005.  Mr. Abraham opines that the Republican Plan lead by John Boehner, the House Minority Leader, would give away federal resources to the states:

“Mr. Boehner’s proposed American Energy Act would, over the next decade, give nearly $40 billion from oil and gas royalties and leasing activity to coastal states that support drilling. And that would be just the beginning. After 2019, the federal government would transfer to coastal states 37.5 percent of all federal revenue from offshore oil and gas activity — at least $6 billion annually, based on current production alone. That’s nearly as much as the government spends on environmental-protection programs.”

In other words Mr. Abraham is concerned that the federal government would be giving way too much of its revenue to the states to spend any way they wanted, in effect having non-costal states that would lose this revenue in federal spending subsidizing these costal states that benefited from the drilling.  He wants the issue discussed on its own merits, not on buying votes with oil revenue profits.

The other piece is also appearing in the New York Times, “Save the Environment – Drill, Baby, Drill”, by Robert Hahn and Peter Passell (Robert Hahn is the director of the Reg-Markets Center at the American Enterprise Institute. Peter Passell is a senior fellow at the Milken Institute).  This analysis considers the cost/benefit analysis of drilling by using the income to fund environmental set-asides and offset environmental damage.  They note that the underlying anti-intellectual conclusion of the Republicans that it will help with gasoline prices is false, but then they look at the income and what it could fund, and conclude that it would be foolish not to drill for oil and use this revenue.

“For better or worse, “drill, baby, drill” is now widely viewed as the cure for what ails. Giving the public what it wants wouldn’t lower gas prices by any meaningful amount. But it would create an opportunity to move public opinion (and huge sums of cash) in the direction of good environmentalism and good economics.”

I find several big omissions in both of these discussions.  First and foremost is global warming.  Neither discusses the impact of continuing to burn fossil fuels on global warming and how this further dependence on oil will hinder/delay our development of alternate energy, which is the ultimate solution to this problem.  It is almost as if global warming doesn’t exist or there is no connection to the use of fossil fuels for energy and this massive threat to our environment.

Then there is the addiction issue.  If we continue to look at our problem as just getting more oil, we have done nothing to change our attitude about its use.  What has got our attention is the price of oil and gas so that we are looking for alternatives.  But even more important are the national security issues.  T. Boones Pickens has got this one right.  We are funding and making possible our greatest threats in the world, Iran, radical Muslim extremists, and let us not forget Russia.  When we consume 40% of the world’s oil and only have 3% of the worlds reserves, adding all of the reserve we can find in off shore drilling won’t change this equation in any significant manner.  So the  focus on more drilling is a focus on more consumption which simply exacerbates our national security problems.

Finally and related to addiction of oil use, is the addiction to the income from oil revenue.  Once states start to utilize oil as their principal source of revenue, thereby reducing the need for taxes for infrastructure improvements and other services like education, police and fire services, what do you think is going to happen when the oil starts to run out and citizens of those states have to pony up to pay for these services?  It will be drill, baby, drill, and it never ends.  Look at Alaska and Louisiana for examples.  Both are running surpluses in their state coffers and both totally dependent on oil income.  Once that addiction sets in, do we think they will want to show the sacrifice necessary to get us off oil to both radically improve our national security and deal with global warming?  Hell no.  Taxes are evil.  There is no shared burden in this mindset.

I think there is a middle ground, but the Republicans won’t think so.  Remember in politics money drives everything so the income going to the voters instead of enhancing our national security is the mantra of the conservatives.  But the answer is that we can allow drilling with the proper environmental controls (meaning expensive) and most of the revenue funding going to what is going to be an expensive national effort to move away from oil.  I would think that the only income to the states to benefit its citizens over all the citizens of the country would be to offset any cost or damage they might have to their state. Note that with oil and gas companies operating in their state, they are already reaping a benefit from the income produced and the state’s taxes on it.  Alaska comes to mind here.  This is the rational approach, but money is king and this will not happen unless we wake-up to the reality of what is happening to us by our own actions or lack thereof.  Thomas Friedman (“Hot, Flat, and Crowded”) describes an interesting analogy that may describe the path we are on right now.  When a man jumps out of a window on the 80th story of a building, for the first 79 stories he thinks he is flying.  It is when he reaches the 80th flight down that reality comes home to roast.  I think we are about 75 stories down already.