Misguided policy leaves country in ditch

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The recovery from the 2008 financial meltdown is much slower than that of other recessions in recent memory. Misguided federal government policy, particularly as it concerns two key sectors of the economy — finance and energy — is largely to blame.

While the energy industry is doing well because of the development of new oil and gas wells in North Dakota and elsewhere, it should be booming. Supplies of cheap natural gas might serve as the feedstock for a vastly expanded chemical industry, with all which that implies for economic growth, job creation and debt reduction.

The administration’s verbal assault on big oil is matched by its regulatory attack on coal. The federal bureaucracy makes it unnecessarily difficult to obtain permits for drilling on federal land and the continental shelf, while the way we treat our neighbor to the north by delaying the Keystone pipeline is a national disgrace.

Economic activity is also held back because some businesses cannot obtain the necessary financing. Again, federal government policy is to blame. Its legal arm has sued the big banks, accusing them of manipulating the London inter-bank lending rate (Libor), which determines the interest rate on consumer and other loans. Yet consumers were actually helped by this activity, since it made Libor lower than it otherwise would be. If this was a crime, it was a victimless crime.

During the financial meltdown, big banks were asked by the federal government to absorb some of their weaker brethren. Bear Stearns was acquired by J.P. Morgan and Countrywide Financial by Bank of America. Now these big banks are being sued for the sins of the entities they were asked to take over. This is not only unjust, but is also counter-productive.

When a bank faces a legal challenge, it sets aside reserves to cover any possible adverse outcome. Reserves, by definition, are not lent and thus cannot foster growth and job creation.

The federal bureaucracy has shifted into overdrive, and churns out pages of new regulation every day, constricting the actions of both the energy and financial industries. Sheer volume is no substitute for quality regulation, based on careful cost-benefit analysis.

It is hard to pull a wagon out of a ditch when two of your most powerful horses are nobbled.

Gordon Philpot

Walla Walla

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Comments

Igor says...

Dr. Philpot is spot on. Our refusal to permit the Keystone pipeline is absolutely absurd. Regulation is strangling business, especially environmental regulation, where the marginal benefits to be derived from the further tightening of regulation are so small that in most cases they cannot even be quantified. Every dollar that is spent by business on attempts to comply with all the foolish regulation is one less dollar that could be put to use expanding plant and hiring more workers. Only the private sector can create real jobs. We cannot spend our way to prosperity by expanding the scope and size of government. We are truly living in a world gone insane.

Posted 1 April 2013, 7:23 p.m. Suggest removal

BluMtn says...

Dr Philpot is correct. President Obama should have nationalized the banks, instead the banks are making record profits, pursing the same irresponsible actions which caused the first melt down, and the responsible parties are not in jail.

Posted 1 April 2013, 9:01 p.m. Suggest removal

loplover says...

Expanding our dependence on fossil fuels is not the answer. Eventually we are going to have to admit that mining more coal, tracking more gas, and drilling more oil is not the answer. TheKeystone pipeline does not benefit this country, while the risk to our aquifers is immediate and could spell disaster for the entire midwest. A few wealthy interests in Big Oil, mostly Canadian enterprises, will make out like bandits, as will the companies who ship the oil from the Gulf of Mexico to China. Our energy companies make record profits every quarter and still receive more tax breaks and corporate welfare than any other type of business. If we want to have a functioning planet to leave our grandchildren, we need to get serious about renewable energy and conservation. Those on the left are also guilty of not looking forward. Their refusal to consider hydroelectric as renewable is silly, and the lack of attention to conservation as a way of saving energy is as short-sighted as the dries of "drill, baby, drill."

Posted 2 April 2013, 10:26 a.m. Suggest removal

namvet60 says...

Mr Philpot is correct - get rid of 80% of the government staff and czars you would see a lot more people work for there money instead of sit around having somebody else do it and go on vacation every month!

Posted 2 April 2013, 6:20 a.m. Suggest removal

kurtfr says...

I wish the gummitt treated me as harshly as it does the energy and bank industries. Profits continue to to be up and Wall St continues to hit new highs.

Posted 2 April 2013, 2:09 p.m. Suggest removal

loplover says...

Absolutely! Our campaign finance system, having been given a shot of steroids with the Citizens United decision, has turned our elections into auctions where candidates sell their souls, and more importantly their votes, to the highest bidder.

Posted 2 April 2013, 5:59 p.m. Suggest removal

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