E!! The True Conservative Story™

Since hearing word of widespread support (Paulson, Congress and the President) for the latest, greatest Bailout I’ve been feeling increasingly dejected.  And concerned.  And angry.

Treasury Secretary Henry Paulson has a “plan” which will “shift” $700 billion in obligations from private companies to the American taxpayer.  Apparently he sees this as the only Way and has 9,000 wizards on stand-by to make it so.  (The same Wall Street wizards that got us into this mess, no doubt?)

And evidently most members of Congress are spellbound and preparing to waft more money New York’s way.

One can only imagine what Banking Committee Chairman Chris Dodd (the largest beneficiary of political funds from Fannie & Freddie) will dream up as he joins hands and sings Tra La La La La with Reid and Pelosi.  I’m not sure how it ends, but I’m pretty sure the working title is Nightmare on Wall Street and that we are barely ten minutes in.

Setting the typically wrong-headed Paulson aside for a moment, how is it that Bush and Congress care so little about protecting the American taxpayer?

And why all the insistence on a quick solution?  This mess was not created in a week, yet Paulson and our illustrious Congressional geniuses think they can solve it by this Thursday?  Does it not occur to anyone that we need to take a deep breath, wade in, and calmly and pragmatically work our way through our many economic and financial problems in a careful and measured manner?

As Newt blogged today (thank God for Mr. Gingrich), between the crisis of liquidity on Wall Street, the crisis of bad energy policy that transfers $700 billion a year to foreign nations, the crisis of Sarbanes-Oxley that cripples entrepreneurs/start ups and drives banks and businesses from New York to London, and the crisis of a high corporate tax rate…we are in some very deep Doo Doo.

Newt proposes a ”non-bureaucratic solution that would stop the liquidity crisis almost overnight and do it using private capital rather than taxpayer money.”  He suggests four reforms that would do the trick without the bureaucracy and additional tax burden.  I suggest you read his blog post as it is well worth the time, but in summation they are:

#1  Stop the mark-to-market rule which is forcing companies into unnecessary bankruptcy. If short selling can be suspended on 799 stocks, the mark-to-market rule can be suspended for six months and then replaced with a more accurate three year rolling average mark-to-market. 

#2  Repeal Sarbanes-Oxley. It failed with Freddy, Fannie, Bear Stearns, Lehman Brothers, and AIG. It is crippling our entrepreneurial economy. One San Jose firm told Newt they would bring more than 20 companies public in the next year if the law was repealed. It’s Sarbanes-Oxley’s $3 million per startup annual accounting fee that is keeping these companies private.

#3  Go to a zero capital gains tax like China and Singapore.  Private capital will flood into Wall Street (at no cost to Joe Taxpayer) and lead to an increase in federal revenue through a larger, more prosperous economy.

#4  Pass an “all of the above” energy plan designed to bring home $500 billion of the $700 billion a year we are sending overseas. With that much energy income, our economy would boom.

E!! endorses these proposals (a fact I’m sure Newt is happy to hear) and strongly advises against implementation of the Paulson plan which by all reasoned accounts is going to be a total Mess.

In closing, I’ll be waiting to see what McCain says and does about all this.  If he doesn’t reject the Paulson/Bush/Congressional plan and closely align himself with much of what Newt said here, I may not be able to vote for him after all.

(Note:  To those who have heard me joke that I am going to “get drunk and vote for McCain,” consider this my semi-official back-peddle…pending the outcome of this mess and McCain’s stand on things.  Let’s see how Maverick-y the self-proclaimed maverick is when it really counts.) 

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Did anyone else feel the urge to choke the living daylights out of Chuck Schumer this week?  If not, you must have missed the Senate floor speech in which he re-opined the tired line that if only the Saudis would produce “half a million barrels more oil a day, the price [of oil] would come down a very significant amount.” 

Why does this statement make my blood pressure rise and my fingers twitch?

Because the tiny impact area within ANWR – a size ratio equivalent to a dime on a 4 x 8’ table – is projected to produce ONE MILLION barrels a day, every day, if only we would drill.  And because Schumer’s (true) statement that a greater immediate supply would reduce prices falls short of saying what is also true:  that even the ANTICIPATION of a greater FUTURE supply would decrease prices in the Now.

Schumer’s other infuriating comment – that more drilling would “stop the speculation that keeps driving up the price of oil” – also missed the proverbial mark.  Speculators wouldn’t “stop” if the Saudis drilled more, because speculation in free markets never stops.

Instead, speculators (also known as investors, also known as buyers and sellers, also known as people trying to earn money for their families and futures) would anticipate the increased oil supply, begin to sell for less, continue to drop prices as volume increased, and thus reverse the current market trend of charging a per barrel premium for what is currently a too-scarce commodity. 

Perhaps  “speculation” would then stop being a dirty word and be seen as what it really is:  the natural response of the market to the forces of supply and demand.  

For those not convinced that these tenets of ECON 101 are true, please note that we’ve already seen the evidence.  As Larry Kudlow reported the other day on NRO, oil prices dropped $9 per barrel the day after the offshore drilling moratorium was lifted by the president.  This is no coincidence.  It is case-and-point and perfectly illustrates what speculation really IS – not a crime against humanity, but the market doing what markets tend to do:  try to anticipate the future and adjust.

It is maddening that the same people who want to spend billions on economy-choking “climate change” measures that might (MIGHT!) reduce temperatures by one quarter degree over the next one-half century cannot see the wisdom of opening a tiny piece of ANWR in return for a sure thing over the next one to ten years.

Each summer the ancient Greeks would sacrifice a brown dog to appease Sirius, the Dog Star, believing it to be the source of the hot, oppressive weather.  Known as caniculares dies or “days of the dogs,” high summer was thought to be a time of evil when the “seas boiled, wine turned sour, dogs grew mad, and all creatures became languid, causing to man burning fevers, hysterics, and phrensies” (Brady’s Clavis Calendarium, 1813). 

Though animal sacrifices to imaginary gods are no longer in vogue, it seems we are still prone to blaming far-away stars for our troubles.  The pains of the current energy shortage have been attributed to OPEC, international futures traders who conspired to drive up oil prices, and foreign forces driving down the U.S. dollar.

The true cause of our decline can be found much closer to home:  in the stagnating halls of Congress.  Our Legislators have failed to open domestic lands and seas to energy exploration, drilling, and new refineries and so billions of barrels of domestic oil are being kept off the market.  As a result, gas has now reached $5 a gallon in some parts of the country.

Arguments that it would take ten years to bring new supplies online sound hauntingly familiar.  Hm…  Oh yes:  it’s exactly what was said ten years ago when the nation last debated this issue.  The short-term thinkers won the last round; will they do so again now?

Critics also argue that we should be focusing on renewable energy sources like solar, wind, and bio-fuels.  Fine, yes, good.  But solar power and windmills can’t take the place of oil in the U.S. economy, and the ”encouragement” (mandates and massive subsides) of bio-fuels has driven up food prices so that we are now paying more at the grocery store as well as the gas station.

Increased domestic oil production is part of the answer.  Our technology enables us to drill with very little impact on the environment (and certainly in more ecologically friendly ways than many of the nations from whom we’re currently buying oil).  Let’s do it, then, while also developing techonologies that might one day enable us to power our nation without oil.

As for the cap-and-trade and windfall profits tax bills the Democrats tried to push through the Senate, we can thank our lucky stars they didn’t pass.  What worries me is what may happen when the dog days of summer are gone and the cool winds of November come a blowin’. 

If the GOP loses contested Senate seats and we elect a president who favors the artificial rationing of energy despite current shortages and high prices, we may well find ourselves wishing on a star for the good ol’ days of $5 a gallon gas.       

In the interest of letting Senator Ensign speak for himself on his energy-efficiency tax credit amendment, you can click here for the full text of his Senate Floor Speech (given Thursday).

For those of you who don’t have time to read all 1,216 words, here’s the sum-up:

Ensign refers to the high cost of energy and says we need smart policy for both our economic and national security.  He claims his amendment offers tax credits that will encourage more development of alternative, renewable energy (solar, wind, and geothermal).

In answer to those who say his bill has nothing to do with housing, Ensign claims his bill will help create between 100,000 and 200,00 jobs and encourage billions of dollars worth of investment, which will strengthen the economy including the housing market.

Ensign also says the tax credits will reward people who produce their own electricity by going solar, who build or buy an energy-efficient home, or who buy energy efficient appliances…and says these are all related to housing.

In re: to the “not paid for” objection, he claims there are “$2.4 billion in tax-related items that are not paid for in [the housing] bill” and that he therefore challenges the Democratic leadership’s claim that his energy amendment won’t pass in the House. 

Ensign asks how the Democrats expect their “not paid for” housing bill to pass if the House is truly not accepting bills that aren’t paid for.  (Indeed!) 

Finally, Ensign says he is pushing for this now because (1) the private financing of solar, geothermal, and wind power projects is critical to their development, (2) his proposed tax credits will allow private businesses to predict and rely on their return on investment, and therefore (c) investor confidence will immediately rise and more clean/renewable energy projects will happen sooner.

In an unexpected move this week, Nevada Republican Senator John Ensign single-handedly delayed a vote on the Housing Stimulus Bill.  His motive?  Many are saying Ensign’s demand that a renewable-energy tax credit amendment be piggybacked onto the housing bill is sheer stubbornness over a pet project. But at least one housing industry insider has a different take, and his answer may surprise you.

As reported by Reuters, Democratic Illinois Senator Richard Durbin said the Housing bill was being hindered because of Senator Ensign’s “insistence on an unrelated amendment.”  The bill’s chief architect, Connecticut Democratic Sen. Chris Dodd of the recent Doddy-wide VIP Mortgage Scandal, said, “one United States senator has decided we shouldn’t do anything but HIS bill.”  Senate Majority Leader Reid was displeased with the delay and applied pressure by threatening to extend the Senate session into the weekend. 

Lobbyists for the Housing Bill chimed in as well.  Yesterday afternoon, I spoke to Ken Gear, Vice President of Government Affairs for Pulte Homes, Inc., one of the nation’s largest home builders.  Mr. Gear said, “This bill is too important for the country to be playing politics with.  The market continues to deteriorate and the Senate needs to work in a bipartisan fashion to get it done immediately.”

When asked whether he was accusing Senator Ensign of delaying the housing bill for political reasons and what those reasons might be, Mr. Gear declined to elaborate.  I spoke to another high-level industry insider who was willing to say more if I would agree to withhold his name:

“This isn’t about housing.  Ensign’s play to attach an energy efficiency tax credit amendment to the bill is purely political because the tax credit is going to cost $8 billion to implement but is not “paid for.”  The House has said it won’t pass any bill that doesn’t specify where the money will come from, and Ensign’s amendment doesn’t include this, so the Democratic leadership knows the bill won’t pass.  

Ensign knows this, too, but he’s trying to score political points by forcing the Democrats to vote against an energy efficiency bill in an election year in which energy policy is going to be a huge issue.”

Stand by for Part Two of Our Series: “Method or Madness: John Ensign Stalls Housing Bill Over Energy Amendment”