New Oil And Old Spending

Back in January President Obama shocked the trend-watchers when he proposed a discretionary spending freeze, an unexpected move from a president who has tripled the national debt in the first year of his presidency. At the same time the move targeted non-defense related spending, further shocking the conservative voters, since “providing for the common defense” is a key responsibility of the presidential role according to the preamble to the U.S. Constitution. Less than one week later we understood that the discretionary spending freeze affected only about 12% of the $3.5 trillion of federal government spending for 2010. In the end, while the world is surprised by what would seemingly be a conservative fiscal move, it is really more like locking away one out of ten credit cards just after having gone out on a weekend shopping spree binge.

To be reasonable, you have to ask yourself two questions:

• What is the point of a 12% freeze? What could that really accomplish? And...
• Does such a freeze signify the start of a fiscally responsible and self-restrained shift in financial policy?

I believe that President Obama was doing two things.  First I think he was grabbing hold of those budgets, for what reason, we do not know.  At the minimum, it was a power grab.  I don’t see how it really has anything to do with actually constraining out of control spending or fiscal responsibility.  In the worst case, it was an attempt to appear more fiscally responsible. But after a massive spending spree it shows about as much constraint as a kid attempting to have a quiet-contest:

“Ok, the quiet-contest starts, now… and I am gonna win, once we start… now… ‘cause I know how to be quiet, and can win this contest… starting…. Now…(etc)”

At the minimum it demonstrates that basic financial principles don’t escape this president: the more we deficit-spend during an economic downturn, the more financially in trouble we become. He just doesn’t seem to be willing to really do what is best.  I think, whether your perspective is conservative or liberal, we can agree that he holds the purse strings and while he holds them he is going continue to write checks toward the end that is his agenda.  Forget the fact that there is no money in the checking account; it is his turn to write checks. If you are conservative, you aren't excited about the president's check writing agenda.  If you are liberal then you might feel differently (even though at the moment, the polls show that regardless of political affiliation, the country wants Congress to slow down the spending.)

But he wants to be viewed as compatible with fiscally conservative values by leaving a mark that seems conservative.  We won’t forget the truth. And right now the same is true of the new oil drilling policy.

Consider this analogy to put into perspective the presidential new-oil policy: 

Imagine that you have just purchased a brand new puppy.  It is still with the previous owner, but within a few weeks it will be in your home after you get through all of the red tape of purchasing a puppy.  At the same time, your city mayor says “I see the need for pets, so I am stating my policy that we will cut through the red tape and ensure that new pet opportunities are explored with new pet seller and we will get to work on gaining access to these new pets for the people of our town.”  Sounds pretty good if you are into pets, right? The people who are not in favor of pets get pretty mad at the mayor at this point.  But the mayor explains some of the details of his agenda.

It ends up that if you were about to get, say, a new puppy… all of those deals are suspended.  Who knows what will become of them.  Maybe you get a puppy and maybe you don’t.  it doesn’t matter how invested or not you were, those deals are basically done.  Big Daddy Mayor has decided no puppy deal for you.  Instead, you can start looking over here in “hamster-town” for pets where he is cutting the red tape. Now his pet plan unfolds for you.

If the analogy is difficult to follow, let me spell it out for you.  Certain oil-friendly groups have been pursuing oil-rich opportunities within the rules of pursuit for a long time now. The oil-friendly groups (mostly conservative) have been working reasonably hard to cut loose that oil. Now, the president is saying we will not pursue (for now at least and there is no plan to change what he is doing now) that known oil.  Instead we will pursue the possibility of oil in some previously politically unavailable areas. Now, these areas are worth investigating and the conservative oil-friendly groups have advocated for pursuing oil their but were stonewalled by the not-so-oil-friendly groups (mostly politically liberal.) These new pursuits now become the new oil-friendly claims (credit to the liberal president) while the old oil-friendly pursuits are now not available (mostly conservative pursuits.) So the new oil pursuits become liberal oil, while the conservative known-oil becomes unavailable. If someone was going to get a job working on an oil rig for old oil, well the old oil job is now gone. But HEY LOOK, the new oil opportunities (that experts say are less likely to produce as much oil) are generating new jobs.

This is a bit of a stretch but it is the only way I can currently make sense of it. New Jobs created in pursuit of new oil will be at the expense of lost jobs that would have been available for old oil now politically unavailable.  And while we will likely find some new oil in the new oil opportunities, the only people losing out on this political move are the American people who would like to see their gas prices come down a bit.

So now we should get a hold of our senators and demand that there is no good political reason for killing the existing known oil opportunities.  If President Obama wants to play Energy Conservative, then we are fine with looking for more oil, but please don’t stop the old oil opportunities. Maybe the president thought he fooled us with the fiscally conservative routine but we aren’t going to fall for conservative posturing twice.