The first farmer was the first man. All historic nobility rests on the possession and use of land. Ralph Waldo Emerson

26 May 2010

A Guest Blogger...And My Response

First, a bit of full disclosure: as is clear to all who may regularly read my blog, it is probably pretty clear that I have a conservative world view. Second, some additional disclosure: I have three sons, and my oldest holds views that are...well, let's just say that his world view is to the left of mine.

He recently sent me an unsolicited opinion paper on the libertarians' response to the growing disaster in the Gulf of Mexico: the BP Oil Spill. He asked me if I would publish it on my blog. I told him I would, provided I had permission to offer specific responses. So here, without further adieu, our version of Point-Counterpoint:




The BP Oil Spill:  A lesson in Libertarianism

Rand Paul has made some significant headlines this week.  For everything said, let me commend him on his public honesty, a rare breed in American politics.  For the media, those honest opinions are like a fresh Whopper for the contestants on “The Biggest Loser” in a room with no cameras.  Beyond making a pundit's job to create attention-catching sound bites a piece of cake, Paul’s comments have opened Pandora’s Box to the true views of the ever-elusive Libertarian ideology.  

Let’s leave the Civil Rights barn burner out of the debate and focus in on an interesting Paul opinion regarding the BP Oil Spill.  

“What I don’t like from the president’s administration is this sort of, ‘I’ll put my boot heel on the throat of BP,’ ” Paul said in an interview with ABC’s “Good Morning America.” “I think that sounds really un-American in his criticism of business.”

Congratulations Rand. In just 2 sentences, you drew a line in the sand between left and right.  Effective, no debate there.  Pragmatic, can’t criticize for that either.  Honest, without a doubt.  Those are all desirable qualities, and I can’t blame your supporters for finding you appealing for the same reasons.  

However, there are also those hippy, bell bottom-wearing, green-dreaming (and smoking, don’t forget), Prius driving, flaming liberals, who for all of those same traits we admire, just can’t get past the principles.

One would be hard pressed to find a lot of fans of Wall Street nowadays.  However, after listening in to the grilling of Lloyd Blankstein on Capitol hill, I will admit something: Wall Street did not get it wrong.  They simply played within the rules of the game.  Their role in that game is to search for profits.  They found profits in mortgage-backed securities, which few argue should be abolished, lucrative derivatives markets, which even the business-hating Obama administration supports through their lack of support for the Lincoln Amendment, and credit-default swaps, which are still being actively traded to mitigate risk.  What was the problem on Wall Street then you may ask?  That they played within the rules of the game.

When in doubt, revert to sports for an example.  There is no actor more criticized in sports than the Zebra.  Everyone, the coach, the fan on the couch, the cheerleaders, the mascot, the hot dog vendor, the girlfriend who doesn’t know where the ball is, is a better ref than THE ref.  And yet, how many sports fans would support removing the ref from the game?  I would venture to say that only a minute few would truly support taking the ref out of the game.  Some may say that they want less active refs, some more active refs, some more intelligent refs,some refs with better eyesight, some may even say that they want to see more women refs, but most would say that the ref is a vital part of ensuring the competitiveness of the game, keeping order to what could otherwise turn into an unscripted Saturday night of Professional Wrestling.  

Libertarians--and, judging from recent primary results, an ever-increasing portion of Republicans--believe that there should be no ref, or if there is a ref, that he have no flags to throw. What are the consequences of this, beyond the 10% unemployment that the United States currently faces?  Let us dissect the BP Spill as a microcosm for the absence of, or weak, regulation.

Where were the regulators?  According to the Libertarians like Paul, the spill is somehow evidence that regulation doesn’t work, shouldn’t be funded, and is downright “un-American.”  Certainly lax regulation, like that identified by Interior Secretary Salazar, and legislation requiring that deepwater drilling permits be granted within only 30 days, not allowing sufficient time to properly assess new well projects, are in part to blame for the spill.  Yet I somehow doubt that the removal of the referee would encourage the market to implement the necessary safety measures to avoid such an accident.  

After all, the risk of such an event is really assumed mostly by the environment, fishing and tourism industries, and the US taxpayer.  Analysts at Barclays Capital estimate the maximum total cost of the clean-up, plus compensation, legal bills and lost revenue could be $22.6 billion, just a hair over the $75 million cap set by Congress, effectively limiting an oil company’s risk.  (I will spare the “Drill Baby Drill” community from the tales of Sea Turtles, Pelicans, or a picturesque sunset on a white sand beach free of tar balls.)

What is so “un-American” about defending the tourism industry, the beach front property owners, and a vast fishing industry from bearing the risk of a single corporation’s lack of safety controls?  Libertarian beliefs in lack of regulation are basically an implicit endorsement of corporate business over small business.  

How did that work for us on Wall Street from 2005-2008?  It is not un-American to look for profits, innovate, compete…and win.  It is un-American to do so by breaking the rules, or doing so at the expense of others.  

And if Paul had his way?  If there were no rules?  I wonder if Paul’s ideal vacation is sipping on a cold PiƱa Colada, overlooking the tar stained beaches of South Florida, as the sole resident in an otherwise vacant condo building.  Just a little piece of Libertarian American Pie. 

Your humble blogger's response: First, congratulations to my son. Well done. Effectively argued. Some very good points. And, as usual, WRONG. (That was a lame attempt at humor.) Actually, I find several of his points compelling. And in an effort to respond crisply and concisely, I am going to break down his arguments into two basic premises: 1) Libertarians such as Rand Paul--as well as many Conservatives--believe that the government is too big and that its regulatory authority is too far-reaching; their solution would be to eliminate or at least significantly reduce the regulatory oversight of the federal government. And the resulting impact would be catastrophic. As proof, witness the brooding disaster in the Gulf--and that even with a regulatory apparatus that Libertarians already see as onerous; 2) We need even more regulatory oversight to protect us against the evils of Wall Street, whose barons played within the rules as they were established by Congress--and still managed to invest in wildly-speculative financial instruments that served to inflate a huge global bubble that burst in September 2008 and plunged the US economy into The Great Recession, from which we still have not emerged some 20 months later.
If I have accurately summarized my son's arguments, here are my responses to each of his main points:
1) There is no doubt that the BP Oil Spill is a disaster of still unmeasurable magnitude. As I write, something like 70,000 gallons of crude are spilling into the Gulf each day. The damage to the pristine beaches of Louisiana, Mississippi, Alabama, and Florida will be sullied by this disaster for decades. (A small aside: last year, my youngest son, who is a student at the University of California at Santa Barbara, found tar balls on the beach--some 41 years after the infamous Santa Barbara oil spill which served as the genesis for the environmental movement in this country.)
Whether you're a liberal, a conservative, a libertarian, or a socialist, we can all agree that what's happening in the Gulf is terrible--and it's worth getting angry about. The economy--and, more personally, the very livelihoods of fishermen, hotel owners, restaurateurs, and many others--will be affected by this disaster for decades to come. The most exasperating part of this situation is that no one knows when the oil will finally quit gushing into the Gulf, meaning the severity of the problem only grows worse and worse with each passing hour.
Since we all agree that this is a disaster and that it's worth getting angry about, let's look at my guest blogger's specific critique: that Rand Paul and other Libertarians think there's already too much government regulation and that--to prove him wrong--we need only look at the soiled beaches and dead wildlife (not to mention the untold thousands of sea creatures) to know that we need more regulatory oversight, not less.
If that's the basic argument, let's look a little deeper at the problem. 
First, let's all agree that accidents happen--no matter how careful we are to try to prevent them. After all, we're human, and therefore prone to error. Yes, we should always try to minimize our mistakes. But mistakes can happen and will happen and do happen, regardless of how hard we try to prevent them.
Second, let's all agree that--given America's insatiable thirst for oil and the federal government's woeful lack of a national energy policy (through both Republican and Democratic administrations)--we must continue to drill domestically until we can develop technologies that will wean us off of the use of fossil fuels and away from the terrible tendency to continue to transfer billions of dollars in wealth from the USA to exporting countries such as Iran, Venezuela, and many other sworn enemies of our country. 
Third, one must ask why it has been so difficult to plug the gaping hole in the bottom of the ocean. After all, that hole is some 5,000 feet beneath the ocean's surface. The fact is that the EPA and the Department of the Interior--as well as many coastline states--have required that oil drilling cannot occur within three miles of the coastlines of those states. Nobody wants to look out upon a pristine coastline and see oil rigs on the horizon, but Washington's aversion to drilling closer to shore has forced the very sort of deep water drilling that is now at the heart of the problem in the Gulf. If a rig had exploded in 500 feet of water instead of 5,000, it's a fair bet that the gusher would have been plugged weeks ago. And while I'll admit that this is pure speculation, even the most hardened advocate on the other side of the debate has to admit that the government is partly to blame for what is happening now.
2) My guest blogger maintains that we need more federal oversight to prevent the kind of gross mismanagement that took place by Wall Street investors (and, for that matter, high roller investors around the world in London, Hong Kong, and many other money centers) prior to the meltdown in the fall of 2008. I will, once again, implore us to look deeper into the genesis of the problem.
In October 2005, Senator Christopher Dodd and Congressman Barney Frank--both liberal Democrats from the Northeast--pushed through bills to "reform" Fannie Mae and Freddie Mac. Even at the time, the Wall Street Journal opined: "Every Congressional session can be counted on to produce its share of bad bills, even dreadful ones. But the 'reform' bill for Fannie Mae and Freddie Mac--due to hit the House floor tomorrow--is in a class by itself." What the "reform" did was to broadly liberalize Fannie Mae's and Freddie Mac's ability to back questionable loans made by private banks to new homeowners whose credit quality was marginal to poor. And when those quasi-government institutions backed those loans, guess who was really on the hook--the American taxpayer.
My guest blogger is correct: the banks and financial institutions played within the rules, and that is indeed the heart of the problem. What he fails to point out is that those rules were created in the middle of the last decade and sowed the seeds of our destruction three years later.
As President Reagan famously declared in his First Inaugural Address on 20 January 1981, "The economic ills we suffer have come upon us over several decades. They will not go away in days, weeks, or months--but they will go away. They will go away because we as Americans have the capacity now, as we have had in the past, to do whatever needs to be done to preserve this last and greatest bastion of freedom. In this present crisis, government is not the solution to our problem; government is the problem." Reagan pushed through the largest tax cuts in the history of our country--and unleashed the longest period of economic growth the nation had ever seen, extending from 1982 through to the end of the 20th century.
Point. Counterpoint.

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