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Obama WH knew drilling moratorium would cost 23,000 jobs August 25, 2010

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by Ed Morrissey

Remember in December when the White House said it would make a “hard pivot” from health care to jobs?  That “hard pivot” didn’t materialize until months later, and in a completely different form than one might have assumed.  The Wall Street Journal reports that the Obama administration’s moratorium on drilling in the Gulf cost Americans 23,000 jobs — and that Barack Obama knew it when he ordered it:

Senior Obama administration officials concluded the federal moratorium on deepwater oil drilling would cost roughly 23,000 jobs, but went ahead with the ban because they didn’t trust the industry’s safety equipment and the government’s own inspection process, according to previously undisclosed documents.

Critics of the moratorium, including Gulf Coast political figures and oil-industry leaders, have said it is crippling the region’s economy, and some have called on the administration to make public its economic analysis. A federal judge who in June threw out an earlier six-month moratorium faulted the administration for playing down the economic effects. …

They show the new top regulator or offshore oil exploration, Michael Bromwich, told Interior Secretary Ken Salazar that a six-month deepwater-drilling halt would result in “lost direct employment” affecting approximately 9,450 workers and “lost jobs from indirect and induced effects” affecting about 13,797 more. The July 10 memo cited an analysis by Mr. Bromwich’s agency that assumed direct employment on affected rigs would “resume normally once the rigs resume operations.”

This may have been a necessary tradeoff if the moratorium was really the needed solution.  However, even the President’s own task force on the Gulf crisis didn’t believe it to be necessary.  They publicly rebuked the White House for misleading the public by linking the ban to their analysis of the disaster, which never contemplated a blanket moratorium.

In the end, the moratorium replaced action by the administration to address the critical failings in its own regulatory regime:

In another document, William Hauser, chief of the regulations and standards branch of what was formerly called the Minerals Management Service, outlined the risks of various drilling activities in an email to colleagues and then wrote: “The more I write this stuff the more I believe we can/should/could regulate/stop activities through a prudent management process versus a moratoria scheme.”

He added, “I guess the moratoria approach is necessary because the MMS cannot be trusted to regulate.” Mr. Hauser couldn’t be reached for comment Friday.

Rather than fix their own problems (which, to be fair, predated this administration as well as continued under Obama and Salazar), Obama and his team instead imposed the ban, killing thousands of jobs and setting back the economy of the Gulf by years — literally.  The capital equipment needed to produce oil in the Gulf has begun to disperse to foreign waters, thanks to the government’s refusal to allow continued drilling by companies that had nothing to do with Deepwater Horizon.  Any new drilling will take years to restart if those rigs float away to other resources, and the capital investment that created today’s rigs may not be as easy to acquire in the wake of the arbitrary nature of Obama’s actions.

That’s one of the reasons why we’re already having trouble producing jobs.  This is just a microcosm of Obamanomics.

An Economy of Liars July 27, 2010

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By Ted Abram

Who actually controls the force of government?   The politicians and interest groups control the American political process.  As stated, the politician seeks power.  Special interest groups – big business, small business, unions, education, seniors, and a multitude of others – seek favors: tax breaks, subsidies, exclusive legislation, etc.  Interest groups give enormous money to political campaigns, and receive gigantic benefits in return.

When government and business collude, it’s called crony capitalism. Expect more of this from the financial reforms contemplated in Washington.

Gerald P. O’Driscoll JR of the Cato Institute writes in the Wall Street Journal of crony capitalism:  the corrupt relationships between politicians, regulatory bureaucrats and big business.  Citing Madoff, Lehman Brothers and the allegations against Goldman Sachs, Driscoll argues the regulators were unable to prevent fraud because of “cognitive capture” caused by the corrupting relationships between politicians, bureaucrats and the regulated.  O’Driscoll writes:

Public choice theory has identified the root causes of regulatory failure as the capture of regulators by the industry being regulated. Regulatory agencies begin to identify with the interests of the regulated rather than the public they are charged to protect.  In a paper for the Federal Reserve’s Jackson Hole Conference in 2008, economist Willem Buiter described “cognitive capture,” by which regulators become incapable of thinking in terms other than that of the industry. On April 5 of this year, The Wall Street Journal chronicled the revolving door between industry and regulator in “Staffer One Day, Opponent the Next.”

Congressional committees overseeing industries succumb to the allure of campaign contributions, the solicitations of industry lobbyists, and the siren song of experts whose livelihood is beholden to the industry. The interests of industry and government become intertwined and it is regulation that binds those interests together. Business succeeds by getting along with politicians and regulators. And vice-versa through the revolving door.

We call that system not the free-market, but crony capitalism. It owes more to Benito Mussolini than to Adam Smith.

Correct, this is not capitalism or the free market.  Government has created and condoned mutually corrupting relationships.  Campaign money goes to the politicians, special laws and benefits enrich big businesses, and individuals with access become wealthy alternating between government and business.

O’Driscoll ends with following refrain:

If we want to restore our economic freedom and recover the wonderfully productive free market, we must restore truth-telling on markets. That means the end to price-distorting subsidies, which include artificially low interest rates. No one admits to preferring crony capitalism, but an expansive regulatory state undergirds it in practice.

Piling on more rules and statutes will not produce something different than it has in the past. Reliance on affirmative principles of truth-telling in accounting statements and a duty of care would be preferable. Deregulation is not some kind of libertarian mantra but an absolute necessity if we are to exit crony capitalism.

O’Driscoll is indirectly calling for limited government: a government of limited and defined powers.  Read the farewell address of Ronald Reagan calling for the need of a limited government, and the more of Democracy and Power 114:  The Power Players.

But back in the 1960’s when I began, it seemed to me that we’d begun reversing the order of things – that through more and more rules and regulations and confiscatory taxes, the Government was taking more of our freedom. I went into politics in part to put up my hand and say, “Stop!” I was a citizen-politician, and it seemed the right thing for a citizen to do.

I think we have stopped a lot of what needed stopping. And I hope we have once again reminded people that man is not free unless government is limited. There’s a clear cause and effect here that is as neat and predictable as a law of physics: as government expands, liberty contracts.

ShoreBank: Is There a Rezko Connection? July 22, 2010

Posted by seeineye in : Politics , 1 comment so far

by Joel B. Pollak

For months, we have been told that ShoreBank deserves a bailout because it serves poor communities. We have been assured by ShoreBank’s patrons, such as Rep. Jan Schakowsky (D-IL), that allowing the federal government to take over the bank will put borrowers in those communities at risk.

Now, as the truth has begun to emerge, it is becoming clear that ShoreBank’s troubles did not begin in poor communities at all.

Robin Sidel of the Wall Street Journal reports that ShoreBank’s financial problems may partly stem from loans made to condominium developers and builders in parts of town beyond its traditional focus on the city’s South Side.

If ShoreBank deserves help because it is the “iconic community development bank,” as Schakowsky recently claimed, what was it doing lending money to condo kings, and why should taxpayers bail it out?

If the ShoreBank is taken over, Schakowsky claims, “the losers will be these low-income communities and the businesses and the homeowners that they serve.”

That was never true.

The businesses and homeowners will be protected, as they are in every federal takeover. Rather, those with the most to lose from ShoreBank’s failure will be its board, its political patrons, and the developers who hoped to profit from its “iconic” status.

This is not the first time that property developers have played a key role in a Chicago political scandal.

Property developer Tony Rezko, a fundraiser for both Barack Obama and former governor Rod Blagojevich, is currently in federal prison on corruption-related charges. During his career, he was involved in many condominium projects in the city, including one that Obama helped him build by urging state funding for the project.

The plot thickens. At the ongoing Blagojevich trial, Ali Ata, the former head of the Illinois Finance Authority (IFA), testified last month that Rezko arranged for him to be appointed to the IFA by helping him pay off the governor.

The current chair of the IFA, Bill Brandt, has been one of the most vociferous proponents of a ShoreBank bailout, and may even have suggested a state-level bailout to ShoreBank, rather than the other way around.

There is another Rezko connection to ShoreBank: Howard Stanback, who serves on one of ShoreBank’s boards, once worked for Rezko at New Kenwood LLC–the same development company that Obama had assisted.

(Rezko’s partner at New Kenwood was Obama’s former boss, Allison S. Davis; Stanback also chaired the Woods Fund, where Obama served along with Bill Ayers of the Weather Underground.)

Until now, the role played by property developers in ShoreBank’s demise has been hidden from all but a few insiders and key officials at the Federal Reserve.

A few days ago, Tim Geithner responded to a request by Schakowsky and other Chicago Democrats by giving ShoreBank an 11-week extension. Before, it needed to raise enough capital to avoid closure by May 21; now, it has until August 6. (How many homeowners get that kind of break?)

Republicans in Congress have pushed for an investigation into the White House’s role in trying to secure a bailout for ShoreBank. Yet we also need a public forensic audit of the bank.

Is there a Rezko connection? Are there developers with ties to the Chicago machine who would be protected by a bailout? What are the connections, if any, to Obama, Schakowsky, and other Chicago politicians?

We need to know–now. At the very least, we can already dismiss Schakowsky’s false excuse that the bailout is for the poor. It is nothing more than Chicago-style corruption on a national scale.

Unions Hire Nonunion Pickets to Protest Hiring of Nonunion Workers July 20, 2010

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by Publius

In yesterdays Wall Street Journal:


In Atlanta, Timothy Baker, a 40-year-old unemployed warehouse worker, says his money-making strategy has been to walk picket lines for $8.50 an hour for the Southeastern Carpenters Regional Council. “It’s something to do until you find something better.”

While many big unions, including the International Brotherhood of Electrical Workers, frown on using nonmembers in picket lines, “we’re not at all ashamed,” says Jimmy Gibbs, director of special projects for the Southeastern Council. “We’re helping people who are in a difficult situation.”

For four hours at the recent Mid-Atlantic carpenters’ union protest in D.C., about 50 picketers-for-hire—some smoking cigarettes, reading the paper, or on their phones; a few leaning on canes—walked in a circle outside the McPherson Building. The place is home to a Starbucks, a spa and offices. “Some days, the beat is very good,” said James Harff, chief executive officer of Global Communicators LLC, a public-relations concern, tapping one foot in his second floor office. Other days, he can hardly hear himself think.

“Low Pay! Go away!” and “That Rat Gotta Go!” the union stand-ins chanted as other workers banged cow-bells and beat on a trio of empty plastic buckets. Eric Williams, a 70-year-old retiree who said he needs extra cash to buy groceries, wore a sign saying that Can-Am Contractors, a nonunion Maryland drywall and ceiling concern, “does not pay area standard wages & benefits.”

The target of the campaign is the Chicago School of Professional Psychology, which is opening new classrooms on the second floor of the McPherson Building, and is having renovations done, including dry-walling by Can-Am.

“It is bizarre,” says Lynne Baker, a school spokeswoman, about the union’s hiring of nonunion picketers.

Inside, Juan Flores, Can-Am’s foreman, said his nonunionized workers are paid fairly. Of the protesters, he said, “I don’t blame them—they need the money, but they look like they are drunk or something.”

The union’s Mr. Garcia sees no conflict in a union that insists on union labor hiring nonunion people to protest the hiring of nonunion labor.

He says the pickets are not only about “union issues” but also about fair wages and benefits for American workers. By hiring the unemployed, “we are also giving back to the community a bit,” he says.

Read the whole thing here.

NYT: Obama WH will argue ObamaCare mandate is a tax July 19, 2010

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by Ed Morrissey

This must have been the Friday night news dump from the White House, but if so, it’s rather stale.  The New York Times reports that the Obama administration will defend the ObamaCare mandates as part of its power to tax, despite Barack Obama’s contentious debate with George Stephanopoulos when Obama denied it was a tax at all:

When Congress required most Americans to obtain health insurance or pay a penalty, Democrats denied that they were creating a new tax. But in court, the Obama administration and its allies now defend the requirement as an exercise of the government’s “power to lay and collect taxes.”

And that power, they say, is even more sweeping than the federal power to regulate interstate commerce.

Administration officials say the tax argument is a linchpin of their legal case in defense of the health care overhaul and its individual mandate, now being challenged in court by more than 20 states and several private organizations.

This qualified as breaking news … three months ago, when the Wall Street Journal first reported that Congress had attempted to quietly create a platform for such an argument.  Randy Barnett argued at the time that it wouldn’t work:

This shift won’t work. The Supreme Court will not allow staffers and lawyers to change the statutory cards that Congress already dealt when it adopted the Senate language.

In the 1920s, when Congress wanted to prohibit activity that was then deemed to be solely within the police power of states, it tried to penalize the activity using its tax power. In Bailey v. Drexel Furniture (1922) the Supreme Court struck down such a penalty saying, “there comes a time in the extension of the penalizing features of the so-called tax when it loses its character as such and becomes a mere penalty with the characteristics of regulation and punishment.”

That is exactly what the mandates do — regulate individual behavior in an area where the federal government has no jurisdiction and punish those who don’t exhibit favored choices, in this case buying comprehensive health insurance regardless of whether it makes sense for anyone.  This court will almost certainly take a dim view of the same attempt that the 1922 court struck down as a gross overreach by the government.

But just for fun, let’s look once again at the President insisting that the mandate couldn’t possibly be tax:

OBAMA: No. That’s not true, George. The — for us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase. What it’s saying is, is that we’re not going to have other people carrying your burdens for you anymore than the fact that right now everybody in America, just about, has to get auto insurance. Nobody considers that a tax increase.

People say to themselves, that is a fair way to make sure that if you hit my car, that I’m not covering all the costs.

STEPHANOPOULOS: But it may be fair, it may be good public policy…

OBAMA: No, but — but, George, you — you can’t just make up that language and decide that that’s called a tax increase. Any…


OBAMA: What — what — if I — if I say that right now your premiums are going to be going up by 5 or 8 or 10 percent next year and you say well, that’s not a tax increase; but, on the other hand, if I say that I don’t want to have to pay for you not carrying coverage even after I give you tax credits that make it affordable, then…

STEPHANOPOULOS: I — I don’t think I’m making it up. Merriam Webster’s Dictionary: Tax — “a charge, usually of money, imposed by authority on persons or property for public purposes.”

OBAMA: George, the fact that you looked up Merriam’s Dictionary, the definition of tax increase, indicates to me that you’re stretching a little bit right now. Otherwise, you wouldn’t have gone to the dictionary to check on the definition.

How much do you want to bet that at least one of the Supreme Court justices quotes Obama in that last sentence to challenge the White House defense of the mandates?