Does it strike anyone else as funny that TARP is a poor anagram for “trap”? If Shakespeare had written this play the name would have been much more clever, of course, but I think he would delight in the barely concealed irony of the federal government drawing banks into its lair with the pretense of saving their hides, only to use the money intended to do so as the means of yoking the industry. I’ll bet the banks who took TARP funds don’t find it so humorous.
Since last October when Hank Paulsen forced nine of the largest banks to take an initial injection of $125 billion in TARP funds (among other bullying), the federal government has committed about $12.2 trillion dollars to bailouts and spent about $2.5 trillion on such efforts (er, among other, other bullying). Aside from an increasing assertion of control over the financial and automotive sectors of our economy (among other, other, other bullying), there is very little to show for all this money. Which leaves the rather stark impression that government control was the goal all along — i.e. the method within the madness.
I must be naive. I really thought the administration would welcome the return of bank bailout money. Some $340 million in TARP cash flowed back this week from four small banks in Louisiana, New York, Indiana and California. This isn’t much when we routinely talk in trillions, but clearly that money has not been wasted or otherwise sunk down Wall Street’s black hole. So why no cheering as the cash comes back?
My answer: The government wants to control the banks, just as it now controls GM and Chrysler, and will surely control the health industry in the not-too-distant future. Keeping them TARP-stuffed is the key to control. And for this intensely political president, mere influence is not enough. The White House wants to tell ’em what to do. Control. Direct. Command.
Here’s a true story first reported by my Fox News colleague Andrew Napolitano (with the names and some details obscured to prevent retaliation). Under the Bush team a prominent and profitable bank, under threat of a damaging public audit, was forced to accept less than $1 billion of TARP money. The government insisted on buying a new class of preferred stock which gave it a tiny, minority position. The money flowed to the bank. Arguably, back then, the Bush administration was acting for purely economic reasons [ed.: That’s a highly charitable argument]. It wanted to recapitalize the banks to halt a financial panic.
Fast forward to today, and that same bank is begging to give the money back. The chairman offers to write a check, now, with interest. He’s been sitting on the cash for months and has felt the dead hand of government threatening to run his business and dictate pay scales. He sees the writing on the wall and he wants out. But the Obama team says no, since unlike the smaller banks that gave their TARP money back, this bank is far more prominent. The bank has also been threatened with “adverse” consequences if its chairman persists. That’s politics talking, not economics.
Think about it: If Rick Wagoner can be fired and compact cars can be mandated, why can’t a bank with a vault full of TARP money be told where to lend? And since politics drives this administration, why can’t special loans and terms be offered to favored constituents, favored industries, or even favored regions? Our prosperity has never been based on the political allocation of credit — until now.
Despite the government’s bullying, it is difficult to feel much pity for the institutions who accepted TARP funds. Surely they must have at least suspected an iron hand inside that velvet glove attempting to feed them. However, if they truly don’t need the money, and have the means to pay it back, then onerous seems too slight a word to express how gripping the government’s control has become:
Financial firms eager to return infusions from the $700 billion Troubled Asset Relief Program will have to demonstrate that they can operate without debt guarantees provided by the Federal Deposit Insurance Corp., a senior government official said Tuesday. The FDIC program allows financial institutions to borrow money at lower costs.
The new requirement will make it harder for some institutions to get out from under government rules attached to the bailouts, another shift in a changing landscape for banks. It also illustrates the government’s desire not to have banks abandon the bailout program if they are not financially prepared to do so.
The government’s desire? I don’t recall exactly where that is accounted for in the Constitution. Is it buried somewhere in the penumbras and emanations of the commerce clause? Clearly the “government’s desire” must have some force of law that it can unilaterally decide to allow banks to sink or swim on their own. Otherwise, such desire is wholly irrelevant.
Nonetheless, banks did take the money, and so the government gets to call the tune. Institutions who would have collapsed absent the bailout have little to grouse about in such circumstances. But other firms, who didn’t need the money in the first place, rightfully bristled at the demands being placed upon them and the opprobrium casually tossed their way by the government.
Kim Price’s Gastonia bank accepted $20 million from the Troubled Asset Relief Program to help keep credit flowing as the economy faltered.
Now the Citizens South Banking Corp. chief executive and other community bankers feel that Congress is treating them like villains.
Proposed new TARP rules that could limit bankers’ pay have upset many bank executives here. And the congressional effort has prompted some banks in other states to give the money back.
TCF Financial Corp, a Minnesota lender, said it repaid a $361.2 million capital infusion that it took from the U.S. government’s bank bailout program, becoming the largest recipient to repay its funds.
Regulators, banks and investors once viewed participation in the program as a positive, figuring that it would help healthy banks lend more and perhaps buy struggling rivals.
But participation is now often viewed as an albatross, subjecting recipients to restrictions on such things as executive pay and dividends.
Investors now consider some banks that hold onto their aid as being too weak to return it. Large banks such as Goldman Sachs Group Inc ( GS – news – people ) and JPMorgan Chase ( JPM – news – people ) & Co have said they want to repay their aid soon.
TCF Chief Executive William Cooper this week said holding TARP money put the bank at a “competitive disadvantage.”
He said repaying the aid and eliminating the associated dividend payments will boost earnings by more than 14 cents per share annually.
By inducing banks to take TARP money, whether through tactics or intimidation, the government has neatly cornered the capital flow of the country. Much like Hamlet surreptitiously forced his uncle to publicly face scorn for his act of regicide (by having performed the “Murder of Gonzago,” aka the “Mouse-Trap”), the government has successfully lured failing banks into the public square for ridicule. Whereas Hamlet sought to elicit a sign of guilt in order to justify his vengeance, however, the government seems intent on effusing guilt throughout the banking industry so as to justify its controlling moves. By tainting the public view of the financial sector, the government seeks to undermine public confidence and build a chorus calling for its heavy-handed involvement. As mentioned above, protestations by the beggars for such action protest too much, methinks, but those who truly have no need of the interference have much cause to cry foul.
Hamlet ends with nearly every character dead, and the country being turned over to its greatest enemy. Unfortunately, the financial sector seems destined for a similar result as the government has made clear it will not allow certain institutions to fail, and is callously indifferent to fate of the unchosen. No matter how well those banks who managed to avoid TARP altogether do, the government is now the major mover in game, and the only one with the power to force its will on all the other players. It can, and will, pass laws that favor the winners its chosen, thus leaving the non-assisted banks out in the cold. In the end, firms who conform to market forces (i.e. respond to the desires of its customers), will be supplanted by those which conform to will of the government’s agenda. The trap was set, the mice did enter, and thus their fates were sealed.
Here at the Offshore Technology Conference in Houston, we were able to hear from a very distinguished panel concerning the energy “debate”. I put the word “debate” in scare quotes because it seemed that the consensus of the panel was there really isn’t a productive debate going on.
Roger Ballentine of the Progressive Policy Institute says that the two sides are talking past each other with little real effort to engage in anything which would actually address strategic energy policy.
Sen Lisa Murkowski, addressed the audience by video and spoke of a “comprehensive” plan which would include all types of energy, obviously including oil and gas. She spoke of a “scarcity of will” on the part of Congress to aggressively go after our own natural resources and cited the Gulf of Mexico as an example. There, she said, lays 45 billion barrels of oil and 320 trillion cubic feet of natural gas that we seemingly refuse to tap.
Yet as API’s President and CEO, Jack Gerard pointed out, when polled 67% of the American public want the exploitation of the oil and gas assets to be found on the Outer Continental Shelf (OCS), and that last week the Florida House passed a bill authorizing drilling off the coast of Florida by a 70-43 margin. That is a huge margin and speaks loudly about the public’s sea change in attitude concerning offshore drilling.
But it seems like no one in power in Washington is listening. And that brings us to the second point this panel made – it is necessary to engage the public/consumer and get them involved in this debate. It is they who will live with and pay for whatever Congress cobbles together regarding energy policy. So far, however, the only thing that has accomplished that level of public engagement is the price of gasoline at the pump. When it was at $4 a gallon, the public emphatically weighed in saying “this is unacceptable” and “do what it takes to fix it (to include drilling in the OCS). Since the price of gas has retreated, to be replaced by the economic recession, the public’s attention has been diverted elsewhere.
But we’re at a critical juncture right now. Legislation is being written and moved ahead within the Congress even while panelists in Houston on both sides of the political spectrum are saying the debate needs to begin in earnest, in a bi-partisan and productive way and the public needs to be engaged.
This was a wide ranging panel and I took 16 pages of notes. This particular post covers 2 of them at best. However this gives you a sense of the frustration to be found among those there representing government, industry and think tanks. Both sides of the broad political spectrum on the panel agreed that the bi-partisan “civil discourse” that would move this sort of policy forward in a positive way doesn’t at present exist even while the legislation outlining future policy is being written.
I’ll have much more to say about this as I wade through the pages of notes I took, but this suffices to give the general impression of where we are when it comes a well thought out and comprehensive strategic energy policy. In a word, nowhere. I’ll get into the “why” of that (“climate change” is the “cultural wedge” that is being used to muddy the energy debate), and the implications in another post.
One of the things I try to do is take a look at stories and decide whether or not there’s enough there to blog about it. And part of that has to do with corroboration. When I first saw the story about the Obama White House allegedly threatening a Chrysler stakeholder during negotiations that eventually broke down, I wondered if perhaps that particular person might have been a little over sensitive or misinterpreted the situation. But it was interesting and something worth watching.
Today comes some corroboration making this a good blog story. Although the story uses anonymous sources, it uses multiple sources, and the reason for the anonymity should be obvious.
Although the focus has so been on allegations that the White House threatened Perella Weinberg, sources familiar with the matter say that other firms felt they were threatened as well. None of the sources would agree to speak except on the condition of anonymity, citing fear of political repercussions.
The sources, who represent creditors to Chrysler, say they were taken aback by the hardball tactics that the Obama administration employed to cajole them into acquiescing to plans to restructure Chrysler. One person described the administration as the most shocking “end justifies the means” group they have ever encountered. Another characterized Obama was “the most dangerous smooth talker on the planet- and I knew Kissinger.” Both were voters for Obama in the last election.
One participant in negotiations said that the administration’s tactic was to present what one described as a “madman theory of the presidency” in which the President is someone to be feared because he was willing to do anything to get his way. The person said this threat was taken very seriously by his firm.
The White House has denied the allegation that it threatened Perella Weinberg.
Is this true? Well, at this point, it is more true than it was when Perella Weinberg was the only one reporting it.
Is this good? No. If true, this demonstrates an abuse of power that has no place in government at any level. While we all understand politics isn’t bean-bag, threats to use political power (not legal power, but the power of the bully pulpit and vilification) in this manner are simply unacceptable.
Again, the more I monitor this and the more I read, the more I believe this may have happened. I’d like to see the anonymous sources step up and identify themselves. Yeah, I know it takes a certain level of courage, but this is one of those “nip it in the bud” moments.
And I’d expect the left to be just as loud in its denunciation of this sort of abuse of power as they were the last 8 years when executive power abuse was a focus of their outrage with the Bush administration.
I assume the reason for their outrage was the alleged abuse, not the politics of the abuser.
It’s rare that I quit reading through a comment section because I happen upon what’s surely the best comment. However, this comment to Capt. Ed’s post about the Obama administration’s thuggish tactics in the Chrysler negotiations sums everything up perfectly:
“I did not have knowledgeable relations with it, that Constitution.”
There’s some interesting stuff out there to read about the Chrysler bankruptcy, like people asking “why wasn’t this done in the beginning”?
Simple answer – in the beginning there was no way to secure the UAW a majority stake in the company. Now, as Felix Salmon points out, that’s been accomplished:
The broad outlines of a deal are already clear: Fiat will take a 35% stake in the company and manage it; the UAW will have a 55% stake; and all the government’s TARP funds will be converted into a 10% stake. Present-day creditors do not get equity but rather get cash; the sticking point is exactly how much cash they will get. And of course present-day shareholders — Cerberus and Daimler — are wiped out, and top management will be replaced.
Of course the reason Chrysler is headed into bankruptcy is because all of its bondholders weren’t satisfied with the deal offered through taxpayers money. As you might imagine, Think Progress has the “progressive” spin on the situation:
As Bloomberg reported, “Obama’s team had first offered secured lenders $2 billion for their $6.9 billion in loans, and then raised the offer to $2.25 billion. In a game of chicken, the holdouts asked for $2.5 billion, and Obama’s patience ran out.” Steven Pearlstein put these numbers into perspective:
What you need to know about these vultures is that their idea of fairness is throwing 100,000 people out of work and denying retirees their pensions and their health benefits just so they can liquidate the company and maybe squeeze an extra 15 cents on the dollar from their Chrysler debt. Of course, to get that extra 15 cents, the hedge funds would probably have to fork over a penny or two to pay the army of $700-an-hour lawyers needed to spend two years working it through the bankruptcy process.
The greed factor here is really appalling, but bad intentions can sometimes produce a good result.
The greed factor here certainly is appalling, but not on the part of the group Think Progress would like us to believe is the problem. I mean, how dare secured lenders ask for more money than a paltry 30% of what they lent Chrysler? In the new world of what’s fair, apparently asking for 30% is unfair and greedy. And frankly with an administration which has tossed trillions around like they were beads at Mardi Gras, it seems that somehow $250 million more was just a “bridge too far” when it came to keeping the deal together.
More importantly, what in the hell is the President of the United States doing involved in this sort of process to begin with? Oh, wait, the UAW gets 55% ownership?
All of this is necessary but not sufficient for Chrysler to have any hope of a long-term future. One of the more interesting things going forward will be how Chrysler manages to turn itself into a smaller, nimbler, change-oriented company while being majority owned by the UAW — which is nobody’s idea of a change agent. In general, if you need a dose of creative destruction, big unions are not the place to look.
You think? Another wonderful deal put together by the folks who want to run your health care. And yes, I know this isn’t perfectly analogous to the British Leyland situation, but it certainly has some striking similarities. A labor union will most likely have to decide between it’s previous decades of focus and producing cars that people want and can afford. And government involved in the deal up to its armpits. In case you missed it, the government will appoint four of the nine member board and the Canadian government will appoint one. Fiat is essentially a management entity with only 3 on the board and a 35% stake. And while the UAW will only have one seat, it will be a seat representing 55% ownership.
Yeah, nothing can go wrong with that.
An moment of sanity prevailed in the Senate today:
For the second time in two years, a provision to allow bankruptcy judges to modify mortgages died in the Senate today, handing the Obama administration a significant defeat in its plans for arresting the foreclosure crisis.
Supporters argued the measure would keep 1.7 million borrowers in their homes, but it ultimately foundered in the face of fierce financial industry and Republican opposition. The bankruptcy modification provision, which was offered an amendment to a broader housing bill, failed by a vote of 45 to 51.
I love how this is reported by the WaPo. The measure failed because of ‘fierce financial industry and Republican opposition?”
Apparently it failed because 14 Democratic Senators said “no”.
Of course, passage of such a measure would make legal contracts in this country subject to review by the courts and arbitrarily changed based on political concerns. Certainly, in this case, such power is only being given for changing mortgage amounts – but as we all know, precedent is what courts operate under, and such a precedent would just as certainly be used to attempt to give the court similar power with other types of contracts.
It’s a phenomenally bad idea, but one you can expect to see attempted again and again, as promised by Dick Durbin:
“I’ll be back. I’m not going to quit on this,” said Senate Majority Whip Richard J. Durbin (D-Ill.), who sponsored the measure.
“At some point the Senators in this chamber will decide the bankers shouldn’t write the agenda for the United States Senate. At some point the people in this chamber will decide the people we represent are not the folks working in the big banks, but the folks struggling to make a living and struggling to keep a decent home.”
You’ve got to love the populist rhetoric and the absolute misrepresentation of what he and those that were trying to get this monstrosity passed were attempting. A fundamental change in how this country has operated since its inception. If courts can arbitrarily change the terms of a contract for social/political reasons, we’re doomed. And that’s precisely what Durbin and his ilk are proposing.
Unfortunately I have no confidence that he won’t manage, at some future time, to push this piece of legislation through. But at the moment, it’s where it needs to be – in the virtual garbage heap of bad legislation.
Or so the saying goes – but in this case it may have a ring of truth to it.
Democrats have been quick to dismiss the Tea Parties which were held in hundreds of locations throughout the country as nothing more than a few disgruntled right-wingers who are sore losers. But instead, they may be the most visible part of a much larger movement that is saying “enough is enough”. And nothing may demonstrate that more than the upcoming special election in California.
Voters there are apparently tired of the legislature not doing its job, and see the 6 ballot measures as the legislature trying to pass the buck instead of doing their job. Consequently, we find a broad consensus that crosses party lines, in opposition to most of the ballot measures proposed. The one most likely to pass, interestingly, has to do with refusing legislators a raise if the state’s budget is in a deficit. In California that means whatever they’re making now is likely to be their pay from now on. Of course, I’d love to see the same sort of measure passed for the Congress of the United States.
To demonstrate the point of citizen bi-partisanship on this are a Republican and Democrat speaking about the upcoming vote:
Voter Barbara Dale, a Republican from Red Bluff, said she will be happy to vote in the special election because she is convinced that lawmakers can’t do their job themselves.
“I don’t like a lot of the things that they’re doing,” said Dale, who plans to vote “no” on Proposition 1A, which seeks to impose state spending restrictions but would trigger $16 billion in extended tax hikes.
“They’re just pushing things through,” Dale complained of lawmakers. “They’re spending too much money, they’re raising taxes, and they’re chasing businesses out of California.”
But Dale particularly wants to vote “yes” on Proposition 1F – the measure to deny elected officials pay raises when there is a state general fund deficit.
So does Democrat Vincent Anderson, an American River College student in Sacramento County.
“Why would we pay them more money when it seems that they’re never doing their job?” Anderson asked. “Their job is to run the state.”
Anderson, who opposes most of the budget reform measures, said he is offended the initiatives are even on the ballot.
“They’re just passing the buck,” he said. “California has been in debt for a while. Why is this (special election) so important now?”
In fact, a large majority of voters polled are not at all happy with the direction of their state’s government:
The poll found a greater proportion of Republicans opposed to the measures than Democrats. More than three-fifths of Republicans oppose the fund shifts proposed in Propositions 1D and 1E, even though both ideas originated with GOP members of the Legislature.
But healthy majorities of both parties – 72 percent overall – answered “yes” when pollsters asked if voting down the measures “would send a message to the governor and the state Legislature that voters are tired of more government spending and higher taxes.”
Now anyone that doesn’t understand that it isn’t just “state government” which has embarked on a program of “more government spending and higher taxes” isn’t paying attention. Thus the “Tea Parties”. If what is going on in California is typical of the developing mood around the country, and I think it is, then Democrats waive off the Tea Parties at their own electoral peril. Instead of Tea Parties being gatherings of a “few hundred” disgruntled “right-wingers” who are “sore losers”, they may just be the tip of a gigantic ice berg of discontent which will begin manifesting itself at the polls as it appears it will in California.
As an aside – that doesn’t mean the GOP is the winner in all of this. I think most of the Tea Parties demonstrated that the people who attended are just as fed up with Republicans as they are with Democrats.
As you may or may not know, I just sent the last week touring the houses of Thomas Jefferson, James Madison and James Monroe – three of this nation’s founding fathers. So when I glanced through the following interview with Barack Obama I tried to picture any of these three men ever contemplating this question or a role for government in the context of the question and frankly, it’s unimaginable.
The only vision I could even begin to imagine is the three of them looking on sadly and shaking their heads “no” in unison as they tried to grasp the size of government and the depth of its intrusion into the lives of citizens the questions and answers indicated. I’m sure they’d also be trying to figure out where it all went wrong. The questions have to do with “end of life care”:
Q:…where it’s $20,000 for an extra week of life.
THE PRESIDENT: Exactly. And I just recently went through this. I mean, I’ve told this story, maybe not publicly, but when my grandmother got very ill during the campaign, she got cancer; it was determined to be terminal. And about two or three weeks after her diagnosis she fell, broke her hip. It was determined that she might have had a mild stroke, which is what had precipitated the fall.
So now she’s in the hospital, and the doctor says, Look, you’ve got about — maybe you have three months, maybe you have six months, maybe you have nine months to live. Because of the weakness of your heart, if you have an operation on your hip there are certain risks that — you know, your heart can’t take it. On the other hand, if you just sit there with your hip like this, you’re just going to waste away and your quality of life will be terrible.
And she elected to get the hip replacement and was fine for about two weeks after the hip replacement, and then suddenly just — you know, things fell apart.
I don’t know how much that hip replacement cost. I would have paid out of pocket for that hip replacement just because she’s my grandmother. Whether, sort of in the aggregate, society making those decisions to give my grandmother, or everybody else’s aging grandparents or parents, a hip replacement when they’re terminally ill is a sustainable model, is a very difficult question. If somebody told me that my grandmother couldn’t have a hip replacement and she had to lie there in misery in the waning days of her life — that would be pretty upsetting.
“…society making those decisions to give my grandmother … a hip replacment?” Above that he points to a doctor giving who that choice?
Below that who is Obama talking about making that decision or having that choice? Well it isn’t his grandmother. And although he uses the term ‘society’, he means government. Note he says that if someone had told him no he’d be upset, but he’s setting up the table to be ‘upset’. This is an old Obama trick – acknowledge the downside in a very personal way while still pushing for that downside.
Q: And it’s going to be hard for people who don’t have the option of paying for it.
THE PRESIDENT: So that’s where I think you just get into some very difficult moral issues. But that’s also a huge driver of cost, right?
I mean, the chronically ill and those toward the end of their lives are accounting for potentially 80 percent of the total health care bill out here.
Anyone who hasn’t quite figured out the rationing model Obama is talking about with his answers to these two questions needs to take a remedial reading course. Anyone – where does he see the opportunity to “cut costs” in the medical field?
And, how will he do it. Unless you’re still hungover from celebrating Guinesses’ 250th birthday, he is talking about denial of service especially to the elderly. Government will determine whether or not you’re worth that $20,000 operation. And the “moral issue” he’s talking about is all wrapped up in egalitarianism. What he’s implying may be “immoral” is allowing those who can pay access to the service while those who can’t pay (and for whom government won’t pay) are denied it.
Again, contemplate the model Obama talks about – reducing the cost of health care – and tell me which way that “moral issue” would be decided? Got the money? Too bad – it would be “immoral” to let you buy the service others are denied.
Q: So how do you — how do we deal with it?
THE PRESIDENT: Well, I think that there is going to have to be a conversation that is guided by doctors, scientists, ethicists. And then there is going to have to be a very difficult democratic conversation that takes place. It is very difficult to imagine the country making those decisions just through the normal political channels. And that’s part of why you have to have some independent group that can give you guidance. It’s not determinative, but I think has to be able to give you some guidance. And that’s part of what I suspect you’ll see emerging out of the various health care conversations that are taking place on the Hill right now.
What a question. The assumption is swallowed whole. Where was the question “what if ‘we’ don’t want others making those decisions?”
And apparently you guys in fly-over country are too emotionally involved to make that sort of a decision through “normal political channels” so government have some unelected outside group develop the “guidance.” Only the elite can answer these questions properly.
Three questions, stunning in their implications. Three answers which should make the skin of all lovers of liberty crawl. I’m again left imagining Jefferson, Madison and Monroe listening in on this with unbelieving looks of horror on their faces. The irony is, their opposition to this incredible power grab by government would again leave them in the category of “radical”.
Down economy? Tax revenues in the toilet? Don’t worry Bunky, government will always find a way to keep it’s revenue stream full:
The days of buying online to avoid paying sales taxes may soon be over.
A bill is expected to be introduced to Congress this week that would force retailers like eBay and Amazon.com to start collecting sales taxes on behalf of states from people who shop online or through mail order.
Of course if you know anything about government you also know this was inevitable. However, it is lines like the following which make my blood boil:
“This would be fiscal relief for the states that wouldn’t require any money from the federal government,” said Neal Osten, a senior policy analyst with the National Conference of State Legislatures, which is drafting the bill.
Osten pointed to a recent study that said state sales tax collections fell to their lowest levels in 50 years at the end of 2008.
My earnings are not there to be “fiscal relief” for profligate states who find themselves with budget shortfalls due to poor budgetary practices. Osten seems to think this is some sort of money tree he’s discovered. More importantly, he seems to view the money as rightfully the government’s, not that of the wage earner. And notice, it is a lobbying group with a vested interest in the outcome writing the legislation. What happened to that promise about “no lobbyists” the new administration made? Special interest democracy is alive and well.
Of course a recession is a great time to pass tax legislation like this – why not cool another segment of the economy by giving priority to government tax collections over spurring economic growth?
The more I observe these lunatics and consider their blinkered and ignorant view of the economic world, the less confidence I have that they’ll figure out that the way out of a recession is to cut taxes, not pass new ones.
Kimberley Strassel has a good article in today’s WSJ about what she sees as Democrats overreaching on climate legislation.
For one, they seem to be misreading the public’s support for the radical type legislation that Nancy Pelosi and Henry Waxman favor. Since the recession has hit, people are much less concerned about the environmental impact of certain industries and much more concerned about preserving the jobs they provide.
But it is more than that – the Democratic leadership seems to be misreading the political tea-leaves as well:
To listen to Congressman Jim Matheson is something else. During opening statements, the Utah Democrat detailed 14 big problems he had with the bill, and told me later that if he hadn’t been limited to five minutes, “I might have had more.” Mr. Matheson is one of about 10 moderate committee Democrats who are less than thrilled with the Waxman climate extravaganza, and who may yet stymie one of Barack Obama’s signature issues. If so, the president can thank Democratic liberals, who are engaging in one of their first big cases of overreach.
Not that you couldn’t see this coming even last year, when Speaker Nancy Pelosi engineered her coup against former Energy chairman John Dingell. House greens had been boiling over the Michigan veteran’s cautious approach to climate-legislation. Mr. Dingell’s mistake was understanding that when it comes to energy legislation, the divides aren’t among parties, but among regions. Design a bill that socks it to all those manufacturing, oil-producing, coal-producing, coal-using states, and say goodbye to the very Democrats necessary to pass that bill.
Of course, that’s precisely what the Waxman’s of the party intend to do. As Strassel notes, Pelosi engineered the replacement of Dingell with Waxman precisely to push the more radical agenda.
And 2010 looms:
There’s Mr. Matheson, chair of the Blue Dog energy task force, who has made a political career championing energy diversity and his state’s fossil fuels, and who understands Utah is mostly reliant on coal for its electricity needs. He says he sees several ways this bill could result in a huge “income transfer” from his state to those less fossil-fuel dependent. Indiana Democrat Baron Hill has a similar problem; not only does his district rely on coal, it is home to coal miners. Rick Boucher, who represents the coal-fields of South Virginia, knows the feeling.
Or consider Texas’s Gene Green and Charles Gonzalez, or Louisiana’s Charlie Melancon, oil-patch Dems all, whose home-district refineries would be taxed from every which way by the bill. Mr. Dingell remains protective of his district’s struggling auto workers, which would be further incapacitated by the bill. Pennsylvania’s Mike Doyle won’t easily throw his home-state steel industry over a cliff.
Add in the fact that a number of these Democrats hail from districts that could just as easily be in Republicans’ hands. They aren’t eager to explain to their blue-collar constituents the costs of indulging Mrs. Pelosi’s San Francisco environmentalists. Remember 1993, when President Bill Clinton proposed an energy tax on BTUs? The House swallowed hard and passed the legislation, only to have Senate Democrats kill it; a year later, Newt Gingrich was in charge. With Senate Democrats already backing away from the Obama cap-and-trade plans, at least a few House Dems are reluctant to walk the plank.
Never mind that passage of this bill would most likely retard economic recovery for the foreseeable future, it might also begin to flip the House politically when its consequences are made clear to the public. Waxman and his allies are attempting to poltically arm-twist and bribe enough Democrats to push this through the House, but it apparently faces tough sledding in the Senate, even with a filibuster-proof majority in the offing.
How this ends up is anyone’s guess, but as strange as it sounds, the recession is our best friend in this case. Cap and trade would be disasterous now – not that it wouldn’t be even in a strong economy. And there seems to be building support on both sides to stop it. What you have to hope is that somehow it will then be delayed enough that the mix in Congress changes to the point that the Dem’s radical environmental policy ends up being DOA.