The further to the left or the right you move, the more your lens on life distorts.

Friday, July 30, 2010

Where’s the Oil?

Over the three months since the catastrophic failure of the BP Deepwater Horizon oil rig in the Gulf of Mexico, I have resisted commented on the story, waiting for clarity. During that time, BP, a company that is clearly culpable for the spill, has been demonized by politicians, the media, and much of the public. Ironically, during the same period of time, President Obama has been harshly criticized (unfairly, in my view) for his lack of action, even though the problem (both the rig failure and subsequent response) was highly technical and there wasn’t much that a politician could do.

As the months passed, we were told by the likes of CNN’s Anderson Cooper (who covered of the story as if it was the only important news story on the planet) that the world faced “an environmental catastrophe” of epic proportions, that the ecosystem in the Gulf was on the verge of destruction, and that the Gulf’s fishing industry and broader economy would be destroyed.

And then, as BP engineers finally developed and implemented a solution, questions about magnitude of the ecological impact began to trickle out of the media.

In a surprising thorough and honest assessment of the spill, Michael Grunwald in Time Magazine (a publication whose past sympathies have been predictably Left-leaning and environmentally alarmist) presents hard scientific data from reputable scientists that brings many of the earlier hyperbolic “environmental catastrophe” claims into question:
The Deepwater explosion was an awful tragedy for the 11 workers who died on the rig, and it's no leak; it's the biggest oil spill in U.S. history. It's also inflicting serious economic and psychological damage on coastal communities that depend on tourism, fishing and drilling. But so far — while it's important to acknowledge that the long-term potential danger is simply unknowable for an underwater event that took place just three months ago — it does not seem to be inflicting severe environmental damage. "The impacts have been much, much less than everyone feared," says geochemist Jacqueline Michel, a federal contractor who is coordinating shoreline assessments in Louisiana.

Yes, the spill killed birds — but so far, less than 1% of the birds killed by the Exxon Valdez. Yes, we've heard horror stories about oiled dolphins — but, so far, wildlife response teams have collected only three visibly oiled carcasses of any mammals. Yes, the spill prompted harsh restrictions on fishing and shrimping, but so far, the region's fish and shrimp have tested clean, and the restrictions are gradually being lifted. And, yes, scientists have warned that the oil could accelerate the destruction of Louisiana's disintegrating coastal marshes — a real slow-motion ecological calamity — but, so far, shorelines assessment teams have only found about 350 acres of oiled marshes, when Louisiana was already losing about 15,000 acres of wetlands every year.

The point to be made here isn’t that the oil spill wasn’t a serious event. It was, and efforts to correct it (e.g., the use of dispersants) may have unintended long-term consequences. But demonization of those who were working feverishly to fix the problem, threats of prosecution (by AG Eric Holder) as corrective actions were being conducted, and counter-factual claims of impending doom before any scientific data had been gathered were irresponsible.

Now three months (not three years or three decades—three months) after the disaster, the media is having a hard time finding any oil in the Gulf waters. Grunwald explains:
The scientists I spoke with cite four basic reasons the initial eco-fears seem overblown. First, the Deepwater Horizon oil, unlike the black glop from the Valdez, is comparatively light and degradable, which is why the slick in the Gulf is dissolving surprisingly rapidly now that the gusher has been capped. Second, the Gulf of Mexico, unlike Prince William Sound, is balmy at more than 85 degrees, which also helps bacteria break down oil. Third, heavy flows of Mississippi River water helped keep the oil away from the coast, where it can do much more damage. Finally, Mother Nature can be incredibly resilient.

Like most serious accidents, the Deepwater Horizon oil spill could have been avoided before it happened and remedied more rapidly once it did. But that’s an easy claim with 20-20 hindsight. Thankfully, it looks like the politicians and the media were wrong in their predictions of utter disaster. It now appears that the Gulf will make a comeback much more rapidly than originally predicted. I wonder if Anderson Cooper will spend any time on that story.

Thursday, July 29, 2010

Edge of Chaos

Niall Ferguson has written an article in The Australian that every member of the Obama administration, the congress, and the ever-growing political class should read and understand. He suggests systems theory can and should be applied to great powers, and at the moment, system theory foreshadows danger for the United States.
Great powers and empires are complex systems, which means their construction more resembles a termite hill than an Egyptian pyramid. They operate somewhere between order and disorder, on "the edge of chaos", in the phrase of the computer scientist Christopher Langton.

Such systems can appear to operate quite stably for some time; they seem to be in equilibrium but are, in fact, constantly adapting.

But there comes a moment when complex systems "go critical". A very small trigger can set off a phase transition from a benign equilibrium to a crisis.
Complex systems share certain characteristics. A small input to such a system can produce huge, often unanticipated changes, what scientists call the amplifier effect.

Empires exhibit many of the characteristics of other complex adaptive systems, including the tendency to move from stability to instability quite suddenly. But this fact is rarely recognised because of our addiction to cyclical theories of history...

Has the Great Recession of 2008, coupled with President Obama’s ineffective and ideologically unsound approach to it become the “trigger” that might lead to our economy going “critical.” I certainly hope not, but Ferguson, a professor of history at Harvard University and the Harvard Business School, sees ominous signs.
Alarm bells should therefore be ringing very loudly indeed in Washington, as the US contemplates a deficit for 2010 of more than $US1.47 trillion ($1.64 trillion), about 10 per cent of GDP, for the second year running. Since 2001, in the space of just 10 years, the federal debt in public hands has doubled as a share of GDP from 32 per cent to a projected 66 per cent next year. According to the Congressional Budget Office's latest projections, the debt could rise above 90 per cent of GDP by 2020 and reach 146 per cent by 2030 and 344 per cent by 2050.

These sums may sound fantastic. But what is even more terrifying is to consider what ongoing deficit finance could mean for the burden of interest payments as a share of federal revenues.

The CBO projects net interest payments rising from 9 per cent of revenue to 20 per cent in 2020, 36 per cent in 2030, 58 per cent in 2040 and 85 per cent in 2050. As Larry Kotlikoff recently pointed out in the Financial Times, by any meaningful measure, the fiscal position of the US is at present worse than that of Greece.

Are we “on the edge of chaos?” The question does seem overwrought, but at some level, polls indicate that a majority of the American public is beginning to ask it, even if that majority cannot enunciate it clearly.

With unemployment at almost 10 percent, our deficits higher than at any other point in history, and an administration perfectly willing to grow those deficits and at the same time engage in class warfare (“tax the rich”) as its vacuous solution to our problems, there is cause to worry.

Wednesday, July 28, 2010

Paying the Price

Patrick Caddell and Douglas Schoen, lifelong liberal Democrats who served in the Carter and Clinton administrations respectively, are representative of a growing number of center-Left political operatives who have begun asking fundamental questions about Barack Obama and his administration.

In an op-ed entitled “Our Divisive President” and published in The Wall Street Journal, Caddell and Schoen accuse the President of practicing devisive politics after running “on a platform of reconciliation—of getting beyond ‘old labels’ of right and left, red and blue states, and forging compromises based on shared values.” They write:
Rather than being a unifier, Mr. Obama has divided America on the basis of race, class and partisanship. Moreover, his cynical approach to governance has encouraged his allies to pursue a similar strategy of racially divisive politics on his behalf.

We have seen the divisive approach under Republican presidents as well—particularly the administrations of Richard Nixon and George W. Bush. It was wrong then, and it is wrong now. By dividing America, Mr. Obama has brought our government to the brink of a crisis of legitimacy, compromising our ability to address our most important policy issues.

When it’s a justice department that refuses to aggressively prosecute clear acts of black on white voter intimidation or a President who initiates class warfare at every opportunity, the administration employs a cynical, Chicago-style politics at every opportunity. The problem is that Barack Obama is not mayor of Chicago, he’s President of the United States. Caddell and Schoen comment on this when they write:
Mr. Obama has also cynically divided the country on class lines. He has taken to playing the populist card time and time again. He bashes Wall Street and insurance companies whenever convenient to advance his programs, yet he has been eager to accept campaign contributions and negotiate with these very same banks and corporations behind closed doors in order to advance his political agenda.

There’s nothing unique about the President’s approach, and that’s the point. Although he promised much more, Barack Obama is nothing more that a cynical politician and an ineffective, inexperienced and wholly ideological one at that.

Pat Cadell and Doug Schoen argue that:
President Obama's divisive approach to governance has weakened us as a people and paralyzed our political culture. Meanwhile, the Republican leadership has failed to put forth an agenda that is more positive, unifying or inclusive. We are stronger when we debate issues and purpose, and we are all weaker when we divide by race and class. We will pay a price for this type of politics.

We’re already paying a steep price and learning quickly that we’ve gotten no bargain.

Tuesday, July 27, 2010

Change the Subject

There’s an aphorism that criminal defense attorneys live by: “When your client is guilty as hell, plea bargain. But if you’re already in front of a jury, change the subject.”

That’s what the Obama administration and its supporters in Congress, the media, and the entertainment industry have been doing for the past two years. In the aftermath of the Great Recession, the President and his people know that their client—big government—is the true guilty party. So, they change the subject.

It was the Congress under both Democratic and Republican administrations that encouraged irresponsible lending practices through ill-advised regulatory changes—the catalyst that turned a bad situation into a catastrophe. It was the administration and Congress that gave new meaning to deficit spending with bailouts and a “stimulus” that did little to create jobs or heal a sputtering economy. It was the President’s vision of big government that imposed ill-conceived health care legislation on a country that didn’t want it and into a business environment that is already roiled with uncertainty. It was the President’s vision of government control that led to passage of a financial “reform” package that does little to reform the underlying problems and continues to leave the tax-payers (a shrinking perentage of the U.S. population) holding the bag for irresponsible Wall Street behavior.

So President Obama changes the subject. In a move that is reflexive, given his strong Leftward ideological bent, the President indicts business as the mastermind of the Great Recession, when in fact, it was only the government’s accomplice. Worse, it is business—and only business—that will create jobs and over the long term get us out of the economic doldrums. But Barack Obama doesn’t seem to recognize this—not surprising given that the President has never spent a day working in the private sector. Worse, the Obama administration has the lowest percentage of cabinet members and top advisors from the private sector of any administration in the past 100 years.

Mort Zuckerman addresses this when he writes:
The growing tension between the Obama administration and business is a cause for national concern. The president has lost the confidence of employers, whose worries over taxes and the increased costs of new regulation are holding back investment and growth. The government must appreciate that confidence is an imperative if business is to invest, take risks and put the millions of unemployed back to productive work.

So the President and the Congressional leadership, in the best traditions of the class warriors that they are, are stumping for tax increases on the “rich.” Of course, the rich are the very people who own and operate small businesses, the economic engine of our country. It is the “rich,” not the big corporations like GM or the Wall street giants (who, by the way, Barack Obama was only too happy to bail out with hundreds of billions of our tax dollars) that are the economic engine of our economy. The “rich” (small business) are the people who create new jobs, spur innovation, and grow the economy. But Barack Obama, Nancy Pelosi, and Harry Reid seem oblivious to these facts. They seem to think that if they decrease the number of dollars “the rich” have to spend, small businesses will grow and prosper. Not.

Zuckerman continues:
This kind of gratuitous and overstated demonisation [of business] – widely seen in the business community as a resort to economic populism on the part of Mr Obama to shore up the growing weakness in his political standing – is exactly the wrong approach. It ignores his disappointing stimulus programme, which was ill-designed to produce the jobs the president promised. It also undermines the confidence that business needs to find if it is to invest in the face of a new generation of regulations, increased bureaucracy and higher taxes.

Disillusion has spread to the Business Roundtable, the US Chamber of Commerce and the National Federation of Independent Business, which represents small businesses. The chief economist of the NFIB recently wrote: “Business owners do not trust the economic policies in place or proposed ... the US economy faces hurricane-force headwinds and the government is at the centre of the storm, making an economic recovery very difficult.”

It’s as if the president wants to cripple small business at the very time he needs them most. In addition to tax increases, Obama has added a hidden tax (largely undefined at this point) associated with the government's ill-conceived health care “reform.” The President, having no experience in the private sector, doesn’t seem to understand that business owners do not like uncertainty and react to it by contracting—no new hires, no expansion, reduced inventories, and the like. Yet Barack Obama is a man on a mission. The problem is, it’s the wrong mission at the wrong time for the wrong reasons.

Thursday, July 22, 2010


On many occasions, I have expressed concern about the size and scope of the Federal government—a self-perpetuating labyrinth of bureaucracies that cancer-like, grows without bound, regardless of the party in power.

As one example, The Washington Post has published an excellent series on the size and scope of the nation’s 1,200 government intelligence agencies and 1,900 private intelligence contractors. In the eyes of Washington bureaucrats, simple and streamlined is never better. The problem, of course, is that the complexity they create is difficult to manage, difficult to adapt, and difficult to execute. But no matter, the 850,000 people with top secret clearance generate 50,000 plus reports. It’s as if paper or pdf were their primary objective.

Over the past 18 months, the Obama administration (a strong proponent of big government solutions) is trying to do to medical care and financial regulation what previous administrations have done to intelligence—make it bigger, more complex, less adaptable, and sadly, not demonstrably more effective. David Brooks reports:
In the second part of the period [2000 – 2010], Democrats were in control. They augmented the national security bureaucracy but spent the bulk of their energies expanding bureaucracies in domestic spheres.

First, they passed a health care law. This law created 183 new agencies, commissions, panels and other bodies, according to an analysis by Robert E. Moffit of the Heritage Foundation. These include things like the Quality Assurance and Performance Improvement Program, an Interagency Pain Research Coordinating Committee and a Cures Acceleration Network Review Board.

The purpose of the new apparatus was simple: to give government experts the power to analyze and rationalize the nation’s health care system. A team of experts on the newly created Independent Medicare Advisory Council was ordered to review and streamline Medicare. A team of experts within the Office of Personnel Management was directed to help set standards for insurance companies in the health care exchanges. Teams of experts serving on comparative effectiveness boards were told to survey data and determine which medical treatments work best and most efficiently.

Democrats also passed a financial reform law. The law that originally created the Federal Reserve was a mere 31 pages. The Sarbanes-Oxley banking reform act, passed in 2002, was only 66 pages. But the 2010 financial reform law was 2,319 pages, an intricately engineered technocratic apparatus. As Mark J. Perry of the American Enterprise Institute noted, the financial reform law is seven times longer than the last five pieces of banking legislation combined.

Many of us who are not members of the political class sense that government growth is out of control, that laws are too complex, the regulation is overbearing, that spending to support all of this is obscene. Worse, we sense that none of it truly solves the problems we face. In fact, much of it might make those problems worse.

In the sciences, there’s a term called “entropy.” To oversimplify, it’s a measure of the disorder or uncertainty of a system. In nature, orderly systems slowly trend toward disorder as they evolve.

Governmental entropy is what we’ve experienced in the first decade of the 21st century. Disorder or uncertainty increase, and to grapple with it, the political class makes things worse by increasing complexity and as a consequence, increasing disorder or uncertainty. It’s an unstable feedback loop that can lead to ruin.

It’s time for our leaders to recognize that simplicity is elegance, that sometimes less is more, that the majority of people in the United States do not need, nor do they want government involvement in every aspect of their lives.

But then again, there’s entropy. We’re in trouble.

Monday, July 19, 2010


I remember the conversation as if it were yesterday. It was mid-October, 2008. Only a few weeks before the presidential election. Many of my more progressive friends and family were gung-ho for the election of Barack Obama and were uniformly offended when I stated that I could not in good conscience vote for the man.

“But Obama is so intelligent and so moderate,” my friends argued, believing the narrative that was promoted widely by the candidate’s followers in the main stream media.

I read everything I could on Barack Obama and concluded otherwise.

“You’re telling us that you’re willing to risk Sarah Palin as President,” remarked a physician friend, parroting a common mime of that period.”

I suggested that Palin, a VP candidate, was indeed unqualified to be President, but that Barack Obama was even more unqualified, and he was the Presidential Candidate.

“But look at how Bush wrecked the economy,” argued another friend. “Obama at least seems to understand what to do.” Recall that the great recession had just begun and bailouts and panic were the order of the day.

“No, he doesn’t.” I responded. "Obama’s background, his lack of private sector experience, his lack of legislative experience, and his very questionable associations with extreme-Leftists, lead one to conclude that Obama has Marxist sympathies.”

The people in the room gasped collectively. “How can you say that?” asked one. “He’s a moderate and you’re sounding like a crazy right winger,” said another.

I reminded them that I did not vote for George W. Bush in 2004, remarking that I felt that a CEO who mismanaged his business as badly as the President mismanaged the first years of the Iraqi war deserved to be “fired.” In fact, I reminded them, I voted for Bill Clinton twice because he was a true moderate.

Of course, my arguments did no good.

But today, every one of those people, both Democrats and Independents, now questions the motives, the leadership ability and the effectiveness of our President. Most admit that were the election today, they would not vote for him.

But that was then. As Obama supporters said during the election campaign, “Elections have consequences.”

Over the past 18 months, President Obama has done just about everything wrong. He recognized our problems, but misdiagnosed them by peering through the lens of class warfare, anti-business propaganda, and an ingrained sense that only big-government can solve problems, create jobs, and right the wrongs of social injustice. Sadly, he is wrong, and his leadership has resulting in every problem—domestic and international—becoming worse.

As his polling numbers continue to slide, President Obama feels compelled to turn up the volume. Mort Zuckerman comments on the President’s anti-business stance:
But one unfortunate pattern that has emerged in the last 18 months is to lay all the blame for our difficulties only on the business community and the financial world. This quite ignores the role of Congress in many areas, but most glaringly in forcing Fannie Mae, Freddie Mac, and the Federal Housing Administration to back loans to people who could not afford them. And not to mention the role of the Securities and Exchange Commission, which in 2004 sanctioned higher levels of leverage for financial firms, from 12 times equity to over 30 times equity.

This predilection to blame business is manifest in the unnecessary and provocative anti-business sentiment revealed by President Obama in a recent speech that was supposed to be seeking the support of the business community for a doubling of exports over the next five years. "In the absence of sound oversight," he said, "responsible businesses are forced to compete against unscrupulous and underhanded businesses, who are unencumbered by any restrictions on activities that might harm the environment, or take advantage of middle-class families, or threaten to bring down the entire financial system." This kind of gratuitous and overstated demonization of business is exactly the wrong approach. It ignores the disappointment of a stimulus program that was ill-designed to produce the jobs the president promised—that famous 8 percent unemployment ceiling.

In observing the Presdient over the past 18 months, it seems that he takes “exactly the wrong approach” far too frequently.

With unemployment stuck at 9.5 percent and real unemployment in some populous states at 12+ percent, it appears that the administration and congress threw money at the problem without understanding it. Now, the administration and congress intend to raise taxes, continue profligate spending, and otherwise drive a stake into any chance of recovery.

Left-leaning pundits ask why business is not hiring, why people aren’t buying homes at bargain prices and historically low interest rates, why the economy is stagnant? Bottom line: uncertainty and lack of confidence in our “leaders.” When you don’t know what coming, you tend not to take risks.

Elections have consequences.