Some Welcome Signs of Life From Private Sector

Michael Barone

Grass somehow manages to grow up through small cracks in the sidewalk. Similarly, the American private sector somehow seems to be exerting itself despite the vast expansion of government by the Barack Obama administration and congressional Democrats.

Case in point: the announcement last week by four oil companies -- Chevron, ConocoPhillips, ExxonMobil and Shell -- that they are setting up a $1 billion joint venture to design, build and operate a rapid-response system to contain offshore oil spills as deep as and deeper than BP's Deepwater Horizon disaster.

Their goal is a system that can start mobilizing within 24 hours of an oil spill. They hope to have it up and running within 18 months.

I suppose one might ask why oil companies didn't do this before. But it seems a vivid contrast with the apparently hapless performance of the Mineral Management Service, recently renamed the Bureau of Ocean Energy Management, Regulation and Enforcement, which seems to have sat on out-of-date response plans for years and which was not able to call in equipment and personnel to respond to the April 20 BP spill for weeks or months.

Journalists tend to assume that effective regulation of potentially hazardous products can come only from government. But industry-generated organizations can provide it, as well.

Consider Underwriters Laboratories, founded in 1894, whose UL stickers come attached to regulator products. Or the Society of Automotive Engineers, founded in 1905, which sets standards for the automobile and other industries.

Government hasn't had to step in because UL and SAE work well without them. Federal regulators couldn't plug the BP well. The oil companies' joint venture promises to be able to do so.

Another case in point, which is different and more diffuse: the "capital strike" I wrote about two weeks ago. In the wake of the uncertainty raised by the Obama Democrats' huge increase in regulations and pending and current increases in taxes, businesses are sitting on cash and not hiring, banks are buying Treasury bonds and not lending, investors are not investing and consumers aren't buying. The economy languishes.

The response here is coming from congressional Democrats alarmed by the prospect, anticipated with relish for years now by so many of their colleagues, of the rise in taxes on high earners next year as the 2001 and 2003 Bush tax cuts expire.

"Whoa!" is the response from Sens. Kent Conrad, Evan Bayh and Ben Nelson. Maybe we shouldn't raise taxes when the economy is languishing. They now say they won't back such an increase.

In this they are following in the footsteps of John Maynard Keynes, who never would have approved tax increases in a lagging economy. And of White House Council of Economics Advisors Chairman Christina Romer, who -- with her husband David Romer, also a respected academic economist -- surveyed tax changes since World War II and concluded: "Tax increases are highly contractionary. The effects are strongly significant, highly robust and much larger than those using broader measures of tax changes."

Democrats have some cause to complain that George W. Bush and congressional Republicans left them with a hot potato when, by using the reconciliation process to avoid a Senate filibuster, they made their now long-ago tax cuts expire after this year.

The Democratic plan has been to continue the tax cuts on people with incomes under $250,000 and to allow cuts above that benchmark to expire. That way they could depict Republicans as aiders and abettors of the greedy rich.

But the defection of Conrad, chairman of the Senate Budget Committee, and at least two Democratic colleagues raises the possibility that even in a lame duck session after the November election, Senate Democrats won't be able to get 60 votes for their plan.

In that case, they will presumably have to compromise with at least some Republicans to preserve popular Bush tax features like the child care tax credit and the 10 percent low income bracket. Otherwise, taxes will go up on even middle- and low-income people just at a time when Keynesian economists say they shouldn't. This is not a bind the Democrats expected to be in.

Two lessons seem apparent here. One is that private firms can do things government regulators can't do. The other is that if you choke the golden goose enough, it stops producing eggs -- and you have to get your hands off its neck. Grass grows up in the smallest cracks.

http://townhall.com/columnists/MichaelBarone/2010/07/26/some_welcome_signs_of_life_from_private_sector

The private sector creates jobs. Not the government. And that’s the fallacy an economic illiterate like you don’t understand. Government spending money does nothing to ease the concerns of those who consider the risks and expend capital for spurring economic activity.

I am waiting for the racist hammer to drop again. If one doesn't care for an Obama policy, then they are racist or a basher or both and if one agrees with anything Bush did then they are a tainted partisan. 

I mean, since all business owners are obviously better at reason and logic than non-owners..... those brilliant minds certainly must align and agree on policies and how they impact the direction of our economic growth. Right?

Edited by soonercntry1 - 26 July 2010 at 1:29pm

No, I am implying that jake is a fake. Nothing more, nothing less.....

Wrong. Just like all walks of life, business owners would probably have differing opinions on policies and impact on economic growth.

I sort of agree with Jake's initial premise, but not completely. I agree with his sentiment that private sector job growth is good for us. The private sector and the government can both create jobs, which is where I disagree. HOWEVER, only the private sector job creation can lead to meaningful economic growth.... which is what I'd imagine Boomerjake was saying anyhow.

I don't know how I feel about gov't stimulus because I've never seen it work in my short lifetime (31 years). TARP was a joke, in my opinion. Bush was a failure with his fiscal policy.

I'm open to putting a foot in my mouth someday, but today side on letting businesses fail and let someone else rise up to take their place. There is no such thing as "Too big to fail". Sometimes a country needs to go through significant hardship to purge their economy of the fat that will slow long term growth. This also humbles a generation to be more open to working hard for what they need, vs. barely putting any effort into work and living fat and happy off of the hard work of their previous generation(s). In my opinion, more ingenuity comes from hard times than from peak times of wealth (which is when complacency and entitlement wreaks havoc).

So I probably side against your opinion that our bumbling idiots in D.C. should ever inject economic stimulus.