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

11 November 2008

The First 200 Days: Fourteen Priorities

1. Close Guantánamo
2. Bring back biotechnology research
3. Rescind Dubya’s last-minute environmental depredation
4. Redirect federal energy subsidies and tariffs from the past to the future
5. Stop corporate welfare
6. Make our bloated military-industrial complex (MIC) lean and mean
7. Save the Chevy Volt
8. Create a National Battery Development Consortium (NBDC)
9. Invest massively in wind power, right away
10. Invest in the right kind of infrastructure
11. Keep people in their homes
12. Avoid losing ground in health care
13. Upgrade our health-care infrastructure
14. Upgrade our air-traffic control system

President-Elect Obama’s mandate for change—plus the enormous good will he has in the international community and our most productive states—gives us an extraordinary opportunity to remake our society. Our multiple crises provide motivation for strong action.

Those who say we should go slow are dead wrong. Of course we should avoid impulsiveness and undue haste; they’re what got us in this mess. We also must shun profligacy (always!). But we must act boldly while our desperate situation still commands everyone’s attention and while the honeymoon lasts.

Many of our problems are decades old. Those of us whose minds have not been clouded by the Little Book of Free-Market Fairy Tales have been thinking about the best solutions for a long, long time. Now is the time to act.

Here’s my own list of what we should do in the first 200 days, in chronological order, with simplest and easiest things first:

1. Close Guantánamo. Close this shameful chapter in our history ASAP. Transfer the prisoners to our mainland. Try admitted “enemy combatants” like Khalid Sheikh Mohammed in courts martial under the Uniform Code of Military Justice. Try people who claim (credibly) not to be enemy combatants in civilian criminal courts. Give them all the civil rights of accused criminals, but make procedural changes needed to protect intelligence and sources. Let civilian judges decide what new procedures are needed, on a case-by-case basis, based on evidence provided by military and intelligence authorities, in secret if necessary. Case-by-case procedural development may take time, but we’ve wasted nearly seven years already.

2. Bring back biotechnology research. Immediately rescind all federal restrictions on funding stem-cell research. To stanch the brain drain caused by Dubya’s misguided policies, increase federal funding for leading-edge biotechnology research, including stem cells. (We’re talking only a few billion here, less than we spend on foreign oil in a month.) Resolve never again to let religion—let alone cynical political manipulation of religious sentiment—govern science. Adopt new regulations to that effect.

3. Rescind Dubya’s last-minute environmental depredation. Rescind all the Bush Administration’s executive orders and regulatory changes relating to land use and the environment during its last 200 days. For example, we don’t need eleven million acres of Utah wilderness overrun by offroad vehicles, which destroy the tranquility of nature, damage delicate desert ecology for decades, waste fossil fuels, and contribute to global warming.

4. Redirect energy subsidies and tariffs from the past to the future. Repeal all federal subsidies for oil and coal, including oil shale and tar sands. Divert the money to start-up subsidies and research for wind power, solar power, and safe and terrorism-resistant nuclear plant design and waste disposal. Commission our nuclear-related national laboratories (Lawrence and Los Alamos) to review and certify all commercial nuclear plant-designs as meltdown-proof and terrorism resistant, with power to force design changes. Provide limited subsidies for converting cars and gas stations from gasoline to natural gas. After area-by-area environmental review, open up closed domestic territory to natural-gas drilling and provide limited subsidies for commercial distribution of natural gas as a transportation fuel. Repeal special taxes and tariffs on imported cane-based ethanol. Consider imposing tariffs on foreign oil to promote domestic production and alternative energy.

5. Stop corporate welfare. Immediately suspend further bailouts of financial and industrial firms pending review. Require any firm receiving federal bailout money to suspend all bonuses, dividends, distributions to owners, and excessive compensation. Make sure that every government investment earns interest at a risk-based rate, involves an ownership stake with a significant chance of appreciation, or both.

Assemble a blue-ribbon panel of economic, financial and industrial experts (preferably including Warren Buffet and Maurice “Hank” Greenberg) to determine whether and how bailed-out firms need assistance in risk management or changes in management. Impose federal receivership when needed to force changes in policy, avoid too risky or risk-averse business plans, or improve management. Sweeten the medicine by preserving what remains of shareholder value, plus the possibility of upside gain if and when receivership ends and private management is restored. End receivership as soon as each bailed-out firm is on track and profitable.

6. Make our bloated military-industrial complex (MIC) lean and mean. The Cold War is over, but our military-industrial complex hasn’t gotten the message. Assemble a blue-ribbon panel, like the base-closing panel, to review all high-ticket military expenditures. Make sure the panel includes prominent, well-qualified, and independent scientists, engineers and economic experts. Have them review the evidence, provide a “reality check,” and curtail waste on infeasible “Star Wars” systems.

Scrap most weapons systems designed for massive conflicts between technologically advanced powers. Keep and streamline projects for intelligence, surveillance, reconnaissance and force protection. Redirect military expenditures toward twenty-first century missions, including finding and neutralizing terrorists and finding and destroying WMD and WMD factories. Provide substantial new money for small, remotely-piloted aircraft, including start-up funds for new industries to make them. Revise procurement procedures to provide: (1) more scientific, engineering and economic input from experts independent of both the military and civilian contractors; (2) more discretion of politically independent military experts within our armed forces, with independent civilian expert advice; and (3) a reduced role for lawyers, accountants and litigation.

In the midst of two wars (one of which we’re losing), we can’t continue to let lawyers and accountants run our military procurement, as they did in holding back our tanker-plane procurement for going on four years. Nor can we afford to base vital (and expensive) military procurement decisions on which member(s) of Congress have seniority and whose district(s) most need employment. We have to go for quality, military necessity, efficiency and speed, as we did in World War II. The MIC we have today would have lost that war.

7. Save the Chevy Volt. The Chevy Volt—a plug-in hybrid that can go 40 miles a day on electricity alone—is the best of our auto industry and its only significant technological innovation in half a century. Scheduled production is less than two years away. GM has assigned several hundred engineers, now about 500, to the project. For the first time in decades, GM appears to be leading Toyota in bringing a new kind of car to market.

Few, if any, of GM’s, Ford’s or Chrysler’s other products can succeed in global competition. If we want a viable auto industry in this country, we cannot let the Volt project die. Nor can we let our auto industry’s many problems hold it back. This is the gem of our once-great industry.

Put the Volt project in receivership or nationalize it (temporarily) if necessary, but keep it running on schedule. Provide subsidies when needed to advance production, lower costs and ramp-up production quickly to meet demand. These subsidies will be the most cost-effective investment in jobs, industry, infrastructure, our environment, and global climate stabilization that we could make.

(My recommendation to save the Volt is purely disinterested. I have no financial interest in GM or any of its suppliers. On saving the rest of what remains of our Big Three, I am agnostic. I have never bought a new American car. From the time I was old enough to afford one, none could meet the competition. I see little benefit in supporting uncompetitive industries with tax money, but I would put my own money in a Volt spin-off.)

8. Create a National Battery Development Consortium (NBDC). As I’ve outlined in another post, good batteries can go a long way toward resolving our energy crisis. They can store wind and solar power for times when the wind doesn’t blow and the sun doesn’t shine. In cars like the Chevy Volt, they can convert our transportation infrastructure from fossil fuels to electricity, including wind, solar and nuclear power. Outside of cars, they can make possible a whole new world of electrical infrastructure—distributed, local generation of wind or solar power, coupled with household storage.

Nothing we could do about energy—in the short or long term—would be more helpful than making the Chevy Volt’s batteries reliable, easy to produce, and cheap. (The rest of the car’s technology is straightforward and non-innovative.) We cannot leave this nationally vital project to a few private companies that compete instead of collaborating. The NBDC provides a way to combine public and private resources, maintain private economic incentives, reward private innovators (including existing competitors) and get the job done fast, with a nationwide full-court press. Done right, it will not require much government expense, just a new approach to public-private partnerships.

9. Invest massively in wind power, right away. Windmills and the power lines to bring their power to our cities are the best infrastructure investment we can make. These technologies are in production and work now. They need no further research or development. They promote energy independence. They reduce pollution and global warming. Although they cost money to install, they provide unlimited energy at very low marginal cost: the cost of maintaining windmills and power lines.

Best of all, when put in our empty deserts and plains, they provoke little, if any, NIMBY resistance. They create jobs quickly. They take months, not years, to plan, build and install. In contrast, nuclear power plants take ten to fifteen years to design, site and build. And GE, one our own few “excellent” companies still standing, is among the top five global producers of windmills and perhaps the most technologically innovative. If we are serious about creating new jobs with new infrastructure, there is no better place to start than massive investment in wind. Even T. Boone Pickens, former oilman and corporate raider, agrees.

10. Invest in the right kind of infrastructure. Investment in infrastructure can create millions of new jobs virtually overnight. But it has to be the right kind of infrastructure. We don’t need more new roads and highways that encourage more people to live farther form work and burn more fossil fuels.

Do invest in mass transit, bicycle paths, bicycle-sharing arrangements in cities (especially in the Sun Belt), innovative community design, and electrical infrastructure designed to support plug-in hybrids like the Volt. Upgrade our intercity railroads, water and sewer systems, wetlands (especially in hurricane country), and Internet access and speed. Repair the crumbling roads, highways, bridges, water supplies and sewer systems we already have. A blue-ribbon panel of city and regional planners, civil engineers, and scientists might be helpful in selecting and prioritizing projects, but only if it is independent from political influence in composition and procedure and can work quickly.

11. Keep people in their homes. Pass a law allowing the federal government to condemn (confiscate, with “just compensation”) all parties’ interests in toxic mortgages and mortgage loans at a “fair price.” Have federal regulators set the fair price—perhaps the “prudent price” at which loans would have been made before all the subprime insanity began. Create a new agency, perhaps within Treasury but advised by the Fed, to condemn, acquire, revise and sell loans and mortgages in or nearing foreclosure. Arrange the acquisition and resale prices to promote a private market in revised loans, as I have outlined in another post.

We cannot wait for private markets to resolve the crisis they have created. Nor can we wait for bankruptcy courts to chew on millions of individual bankruptcies, as President-Elect Obama has proposed. With a condemnation procedure, people can be kept (or put back) in their homes with sustainable payments now, and litigation over “just compensation” can proceed later. This procedure would put the burden of litigation on the managers who caused the crisis, or those who seek to profit from it by buying troubled paper, rather than on mostly innocent ordinary homeowners.

12. Avoid losing ground in health care. During the next two years, millions of people are going to lose their health care because they are going to lose their jobs. Whatever we do with health care in the long run, immediately enact some “stop-gap” measures. Extend COBRA (the federal law that allows you to purchase an individual health insurance policy from your employer after your employment ends) from eighteen months to thirty months. Have HHS or a blue-ribbon panel design a national model low-cost health-care policy focusing on preventive care, urgent care (for patients disabled or in acute pain), and catastrophic care (urgent care for life-threatening conditions). Make sure that policy covers pre-existing conditions. Let private markets develop policies that fit the model and apply for federal certification. Subsidize premiums for certified policies for people who have lost their jobs, perhaps with additional unemployment insurance, which President-Elect Obama already plans to extend.

13. Upgrade our health-care infrastructure. Private medicine’s resistance to computer technology is scandalous. The average small business, lawyer’s office or accountant’s office makes far better use of modern technology than does the average doctor or hospital. We must cure this modernity deficit ASAP. Doing so will improve efficiency, reduce costs and provide jobs for millions of computer programmers, consultants, and workers in the computer hardware and software industries.

Without delay, have the federal government, in consultation with private standards-setting organizations, develop no more than two or three alternative transmission and storage formats for medical data, including lab reports and radiological images. Include existing industry formats like HTML or XML. Make the federal standards flexible to accommodate future development. Make sure they are mutually compatible and permit interchanging data and equipment. Develop at least one standard based on “open-source” software. Then pass a law requiring, as a condition or federal reimbursement (including Medicare and Medicaid), that every doctor, medical laboratory, clinic and hospital adopt and implement one or more of the listed standards within twenty-four months. Provide subsidies where needed, for example, in rural clinics and hard-pressed big-city hospitals.

14. Upgrade our air-traffic control system. Convert our air-traffic control system to a GPS-based system, using radar only near airports and as a backup. To create massive new employment—in good jobs with high pay, in electronics, airport management and the software industry—get this project up and running quickly. Boost the quick start by specifying flexible, open standards that encourage industrial competition. Jump-start the conversion with limited subsidies for “showcases” at designated city pairs (cities between which there is massive air traffic with consistent delays). After specifying standards and supporting demonstration projects, let the private sector do the rest, subject to regulation for safety and reliability.

Conclusion. If you scan this list carefully, you’ll see that most items don’t require a lot of federal money. What they do require is expertise, competence and sound management in the public interest.

The federal government need control only the direction, organization and initial management, in some cases with the aid of blue-ribbon panels. Once it has given the private sector a new direction and stripped it of bad management, naked greed, and anti-social business models (like expensive, heavy, gas-guzzling SUVs and multiple, mutually incompatible health-care data formats), private ownership and management can return. None of these suggestions need involve long-term government ownership or control of commerce or industry or more than temporary government supervision.

We the people elected Barack Obama to provide just that sort of direction and management. We did so because the private sector has failed us miserably, demonstrably and repeatedly. Call it industrial policy if you wish. But please don’t call it “socialism” or “big government.” It’s neither.

As we were reminded so repeatedly and painfully during the last eight years, elections have consequences. This sort of industrial policy is what a decisive majority of our people want and what the overwhelming majority of our national productivity elected Obama to do.

Every one of our global competitors has an effective industrial policy and competent national planning. We should, too. Let’s get to work.


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