Diatribes of Jay

This is a blog of essays on public policy. It shuns ideology and applies facts, logic and math to economic, social and political problems. It has a subject-matter index, a list of recent posts, and permalinks at the ends of posts. Comments are moderated and may take time to appear. Note: Profile updated 4/7/12

12 October 2010

The First Big Mistake


Since March 2007, I have been a strong and loyal supporter of Barack Obama and his unfairly beleaguered Administration. But I am also, I hope, an honest man. Honesty now compels me to acknowledge his administration’s first serious, consequential mistake.

The mistake has nothing to do with the constant stream of vicious propaganda, lies, and innuendoes against the President. It was an error of policy that is easy to describe. Unfortunately, it is both fundamental and important. And of course the Party of No―except for one senator―contributed immensely to the blunder.

The Obama Administration ended up putting health-care reform ahead of energy reform. The result was a missed chance to actually achieve limited energy reform. That may have been the last chance for a decade.

This essay outlines how the error occurred. Then it explains why energy reform is ultimately far more important to our national future than health-care reform, let alone the half measure that the President was able to push through over the figurative dead bodies of the Party of No.

A recent superb piece of investigative journalism explains the hows. In essence, the Obama Administration failed adequately to support a year-long bipartisan effort by Senators Lindsey Graham (R., S.C.), John Kerry (D. Mass.) and Joe Lieberman (I., Conn.) to get an energy-reform and climate-repair bill based on cap and trade through the Senate. The effort was serious, concerted, prolonged and apparently genuine on all sides. But in the end it came to nothing.

Given the state and aims of the GOP and the nation’s general lack of seriousness, it might have come to nothing anyway. But the Obama Administration contributed to the failure in two ways.

First, the President remained aloof and detached from the horse-trading going on in Congress, and perhaps unaware of it. He and his senior advisors did little even to help the three senators corral various private interests and their factions in Congress into supporting a serious bill. The White House did virtually nothing to guide or shape the effort.

Second, the White House effectively killed Lindsey Graham’s ardent efforts to achieve bipartisanship. It let him flounder and ultimately fail, at great cost to his political position in his home state.

It did so by undermining a key compromise, under which the fossil-fuel industries had agreed not to demagogue cap-and-trade as a “gas tax.” At a crucial moment, the White House stabbed Graham in the back by issuing its own press release calling the compromise a gas tax. Furious and hounded by crazies from his home state, Graham abandoned the effort, and it died.

The White House may have acted in response to a recent meeting of environmentalists who appeared not to understand what was going on. The whole debacle was a massive failure to communicate. Perhaps it was also a massive failure of trust engendered by our poisonous partisanship.

There was plenty of blame to go around. In a spectacularly selfish blunder, Senate Majority Leader Harry Reid helped torpedo the effort by publicly promising to put immigration reform (which had no chance in hell of occurring) ahead of energy reform, just to appease Hispanics in his home state for his own re-election effort. The Administration’s hand that held the knife may well have been Rahm Emmanuel’s, or some else’s close to the President. Zealots on both left and right no doubt were happy to see any compromise die, and the Administration had and has some of them.

I can’t believe the President knowingly let this happen. The failure is out of character for him, who believes deeply in bipartisanship and compromise, both of which were evident in his successful health-care reform. But even if inadvertent, the failure happened on his watch and among his staff. So he must take responsibility. Maybe that’s why we’re now seeing some real changes inside the White House.

The more interesting point is not how the bipartisan effort failed, but why. Of course the primary reason is the takeover of our government by wealthy private interests.

The details of the Graham-Kerry-Lieberman effort reveal something that should be astounding, but which now is business as usual. Each of the three senators took for granted the need to appease the extractive and refining industries, the American Petroleum Institute, and the U.S. Chamber of Commerce. Rather than bargain with their colleagues in the Senate, as our Founders intended, the three stalwarts had to bargain directly with these and other monied interests that pull the strings. The distortion of representative government was and is so entrenched as to seem routine.

Vested interests in our nation now control fundamental policy. Maybe they always did. But they nearly always favor the status quo. That’s why they’re “vested.”

The nation cannot move ahead without their consent. But they won’t consent to anything new―let alone anything as fundamental and far-reaching as energy reform―without substantial dilution and payback. The result is a huge inertial flywheel slowing our nation’s forward motion and hobbling us in the race against future-oriented cultures like China’s and Europe’s. Our outmoded social and political structure is every bit as much a hindrance as our outmoded infrastructure.

But we all know that. What was less apparent, I think, is another fundamental flaw of our society. Most of our leaders are lawyers by training, not engineers or economists. To them, a win is a win. They just don’t bother to calculate or reason how important it is quantitatively, in part because they don’t know how.

Even a brillaint law professor like the President has no basis for doing the math, let alone quantitative intuition sufficient to trace the magnitude of probable consequences. So it was natural for the President to conclude that health-care reform was more important than energy reform, especially as his predecessors had tried and failed to accomplish it for over a century.

But it isn’t. Health-care reform was and is important, and it’s still not finished. But energy reform is far more vital to our future and the planet’s.

Let’s start with the numbers. We import a little less than ten million barrels of crude oil a day. At $75 per barrel, that’s an expense of three-quarters of a billion dollars a day, $ 274 billion per year, and $2.7 trillion dollars over a ten-year period.

That’s assuming the price of oil won’t go up, which it will, sharply, as soon as the global economy starts to recover, whether or not ours does too. Oil reached $140 per barrel in recent history (just before the crash), so we know that at least a $5.11 trillion ten-year dead loss is probable.

Unlike the so-called “gas tax,” which would encourage investment in conservation, efficiency and alternative energy, that money is just gone. It literally goes out our exhaust pipes. It contributes nothing to infrastructure, R & D, or national development. It constitutes a direct “tax” on consumers and business, large and small. It increases our balance-of-payments deficit. And a significant fraction of it goes to nations like Saudi Arabia, Iraq, Iran, Russia and Venezuela, which are hardly the paragons of modernity that we would like to support.

In contrast, we don’t know how much of our health-care dollar is wasted. We do know that all of health care accounts for about 14% of our $ 14 trillion economy, or about $ 1.96 trillion per year. If as much as ten percent is entirely wasted, that’s only $196 billion, or about 70% of what we pay for foreign oil. If as much as 20% is entirely wasted, that’s $392 billion per year, or 43% more than what we now pay for foreign oil. But it’s still less than what we will pay per year if oil goes back up to $140 per barrel.

More important, every penny of our health-care “waste” stays in our own country. It supports our own people, recirculates in our economy, and adds to our wealth. The money that flows out to foreign oil producers enriches them, not us.

Then there are the virtuous and vicious cycles. Some of the money we spend on health care goes for innovation in drugs and medical equipment. As a nation, we are highly competitive in those spheres. We still have the best pharmaceutical companies in the world, and our own GE is neck-and-neck with Germany’s Siemens for global leadership in high-tech medical equipment. We also have a large number of smaller, innovative medical technology companies. Some of the money we spend―or overspend―on health care goes for R & D and innovation at home, in these vital fields.

In contrast, the money we spend for foreign oil gets burned up. We have no leadership in automobiles; our car companies are just barely hanging on. Every dollar we waste on foreign oil entrenches our lagging car companies, their parts manufacturers, and our infrastructure in a technology that is rapidly becoming obsolete: the internal combustion engine. The expense not only gets burned up in our exhaust pipes; to the extent it encourages anything, it leads away from electric cars and mass transportation and back to obsolete machines. Thus does it undermine, not advance, what remains of our national technological and industrial enterprise and much of our heavy industry.

All this, or course, is oblivious of climate change. Every one of these numerical and consequential disadvantages would be equally obvious and equally important even if we were not cooking our planet in our own exhaust gases.

But we are. There is nothing comparable in health care. We may still have too many uninsured. But we probably have the best epidemiology and first response to health-care emergencies in the world. Nothing in health care threatens our society, our industrial advancement, our health, our national security and our species the way climate change and our dependence on oil produced by others do.

So a rational, quantitative assessment of risks and threats puts energy reform an order of magnitude ahead of health-care reform, now and for the foreseeable future. Yet the President got partial health-care reform and dropped the ball on energy.

With elections coming and the risk of a reduced Democratic majority ahead, the road to energy reform will only get steeper. The missed chance may constitute a key misstep in the decline of our nation and perhaps our species.

This is what we get in a society run by lawyers, where people who can do math and use mathematical intuition to predict consequences are, at best, hired hands. And this is what we get when the few “quants” in positions of power are as arrogant, narrowly focused, unseasoned, and lacking in vision as Tim Geithner and Larry Summers.

While I fault the President for these failures, I continue to support him. He’s still by far the best we’ve got. The realistic alternatives are so much worse as to make them unspeakable.

The Party of No will never surpass the party of “Let’s do something,” either in substantive success or my own estimation. And the President continues to do many good little things under the media radar, including getting the military involved in clean energy. So I’ll continue to support, vote for, and contribute to the Democrats and the President.

But the basic problem remains. The President promised to be a transformational figure. Maybe he still might. But the biggest problem of our nation and our species remains not only unsolved, but largely unaddressed. It is growing in magnitude and threat every day.

Our most needed transformation, from fossil-fuel dependence to a “green” and independent energy economy, still lies ahead. The President could do worse than devote his entire remaining energies while in office to it. Doing so might also create new, clean, good-paying non-outsourceable jobs.

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