In January, 2001, George W. Bush and Dick Cheney were just taking control of the government as the nation struggled with rapidly escalating energy costs. California was hit especially hard with outrageously high power rates and power outages . Governor Gray Davis was facing a recall vote for his handling of California's energy crisis. Was this the result of President Clinton's failed energy policy?
It was a problem which called for immediate action and the new administration was determined not to waste any time in taking control of it. One of Dick Cheney's first actions was to name Bush and Cheney's old friend, Enron CEO Kenneth Lay, to head to head a task force, comprised mostly of oil executives, to develop energy policy. They showed up at the White House in February 2001 to secretly begin work on a plan which would tilt heavily on oil production and deregulation of energy resources. Cheney fought the release of the minutes of these meetings all the way to the Supreme Court. It was this plan that would eventually create the conditions for the BP oil rig explosion and contamination of the Gulf of Mexico.
However, there was a subtext to Lay's work inside the White House as we would learn later. While California's Democratic Governor Gray Davis was struggling with skyrocketing energy prices and blackouts, Enron was secretly spot selling California energy to surrounding states and shutting down power grids. Lay wanted California to deregulate California utilities to give Enron access to their markets and he was willing to shut down the power to millions of Californians during a heat wave to get what he wanted. Davis was blamed for California's energy crisis even though the regulations governing that policy had been approved by the former Governor, Pete Wilson. As Davis' popularity waned, Ken Lay set up a secret meeting with Actor Arnold Schwartzenegger to discuss California's energy problems and to pledge support to Schwartzenegger as a recall candidate against Davis. Davis met with President Bush in California five days later to request federal assistance in dealing with California's energy problems, which Davis believed were the result of market manipulation. Bush rejected Davis' request, blaming California's woes on their own policies of regulated energy. Although Davis was not responsible for California's energy problems, he would become only the second Governor to be recalled in the United States. Arnold "The Terminator" Schwartzenegger was elected Governor of California in the same recall election.
Although this scenario has little to do with today's lingering economic problems, it illustrates how a Governor or even a President may be suffocated by the gregarious and exploitive actions of private industry. President Obama had nothing to do with the oil rig explosion in the Gulf, but it has taken over control of his presidency. He will be judged on his handling of it, right or wrong, and it could easily become one of the defining issues of his presidency.
Obama's handling of the economy will also define his presidency. In his first year and a half in office, he had little success at stemming the tide of foreclosures or unemployment. The stimulus did preserve many public sector jobs, at least temporarily, but there has been little growth in the private sector. Where are the initiatives which drive capital and investments into innovation, development, and job creation?
If investors are able to invest in high return securities or precious metals, where is the incentive for investment in real development of tangible assets? Most of the job growth (97%) this month came from the hiring of census takers. Despite rapidly growing budget deficits, few could identify actual initiatives or programs designed to create new job opportunities or new industry. Budget problems severely limit the government's capacity for job creation, but without them, we will not be able to grow ourselves out of our economic malaise. Jobs do not create themselves, and in these lean times, it is unlikely that we will simply grow out of the recession for years. In addition, U.S. military policy consumes the vast majority of discretionary spending, leaving little for government investment in technology, innovation, and development. Still, If President Obama is unable to turn things around, it will be he and the Democrats who are held accountable for the bad economy. He will have to think out of the box and he will have to own the economy if he is to control it. If he fails, it will control him, just as the oil spill is controlling him right now. Obama must demand more from himself and his staff, if he is serious about turning the economy around. His actions will have to be deliberate, timely, and pragmatic, and maybe even controversial and unpopular, but it is the only way he can succeed.
President Obama should immediately create a Department of Technology, Innovation, Planning, and Development to develop a strategy for investment and growth. As a cabinet level department, (1) it should focus attention on shifting priorities, goals trends and innovation. (2) It could provide an analysis of federal spending and develop recommendations for reordering priorities, using an "index of economic stability" of key indicators like GDP, production, sales, imports, investments, savings, interest rates, housing starts, CPI, housing prices, cost of living, minimum wage, unemployment, bankruptcies, foreclosures, poverty rate, etc. (3) It could develop a plan for spending measures to promote economic growth, business expansion, community development, environmental protections, technological advancement, educational achievement, resource management, and national security; (4) it could provide a methodology for the creation of a national transportation policy and set priorities for infrastructure development.
A Fiscal Responsibility Act: is also needed (1) to review tax codes and to create incentives for capital investment in real development, expansion, personnel, and growth of tangible assets;(2) to impose tax penalties for investments in risky financial securities, foreign operations and securities; (3) to discourage the hoarding of wealth; and to create a National Infrastructure Reinvestment Bank to leverage private investment in infrastructure improvements.
A Clean Energy Act: is needed (1) to mandate conversion to renewable fuels and to encourage substantial reductions in fossil fuel consumption; (2) to stimulate investment in the development of wind power, solar power, advanced biofuels, and more efficient transportation fuels; (3) to allow tax credits and incentives for conversion to energy efficient systems; and (4) to modernize the power grid.
Finally, we need a Family Recovery Act: (1) which requires compensation to be paid to foreclosed home buyers, if resale value exceeded equity; (2) which requires "good faith" renegotiation of mortgages at least six months prior to foreclosure; (3) which creates a Federal Loan Authority to assist small business owners, home buyers, and students who fail to qualify for conventional loans and who have been displaced by economic factors. (4) It should provide economic incentives for small business development through micro loans and investments, securities, and simplified business startup requirements. (5) It should offer temporary employment initiatives like employer sponsored on-the-job training programs, public employment opportunities, public works projects, targeted jobs tax credits and debt relief.
President Obama has pledged to hold BP accountable for the financial loss to those harmed in the Gulf by the massive oil spill. Similarly, the banks should be held accountable for the massive loss of wealth and opportunity created by the collapse of the U.S. economic system due to risky speculation, irresponsible management, and corruption of the regulatory process. It's Obama's game to win or lose, but there are a lot more Ken Lays just waiting in the wings to replace him with the next "acting" President.