RALEIGH – Many North Carolinians are fearful and angry right now. They have every right to be. Long after the ravages of Hurricane Ike, many in the Charlotte area and western North Carolina are still waiting in gas lines, unable to buy needed gas at any price. And North Carolinians across the state are fretful about the past week’s events in New York and Washington.
In each case, the circumstances were not entirely of government’s making. The storm damaged key oil refining and distribution facilities along the Texas coast. As for the financial meltdown, reckless lending and irresponsible borrowing explain the proliferation of mortgage-backed securities whose toxicity has poisoned financial institutions and led to paralysis in worldwide capital markets.
But in each case, the public has been poorly served by its elected representatives, by individuals who exhibit little understanding of economic realities or willingness to take responsibility for their own past misdeeds. North Carolina deserves better. America deserves better.
With regard to the gas shortage, state officials didn’t cause disruptions to gasoline supplies. But by threatening to enforce an idiotic new law against pricing gas to market, Gov. Mike Easley and Attorney General Roy Cooper scared gas retailers into keeping prices artificially low. Instead of allowing the short-term prospect of $6 or $7 a gallon to encourage motorists to buy only what they needed for immediate use, the state encouraged hoarding and discouraged the delivery of more supply from less-stricken areas to more-profitable markets such as Charlotte and Asheville (and other Southeastern cities, as other states also wielded their anti-gouging clubs). Gas lines themselves impose a cost, in lost time and fuel, so many consumers were effectively paying $6 or $7 gas prices, anyway, but in the least-efficient manner.
As for the Wall Street meltdown, the details of a much-lauded, $700 billion financial-bailout compromise emerged over the weekend. While somewhat improved from the Bush administration’s original plan, it was still a grotesque piece of legislation, an arguably unconstitutional and certainly unwise grant of governmental power over the American financial system to an unknown treasury secretary (Henry Paulson won’t be on the job long enough to implement it) to carry out a debt-purchase scheme that was unlikely to resolve the real problem in the first place.
It was supported by President Bush, who remains mired in public disapproval. It was supported by the leaders of the Democratic Congress, who aren’t even as popular as Bush. Senate Republican leaders, with the key and heroic exception of Alabama’s Richard Shelby, supported the bill. House Republican leader John Boehner helped voiced conservative objections to the original Paulson plan last week, but then resigned himself to voting for what he called a “crap sandwich.” (There’s a hilarious “Spinal Tap” riff lurking underneath the comment, as is so often the case.)
So the great and terrible Wizards of Washington drew the curtain, fashioned in private a legislative contraption of dubious workmanship, and then told the American public to trust them with it. The public said no. Capitol Hill was showered with calls from angry constituents, Democrats and Republicans, who recognized a piece of junk when they saw it. Polls of likely voters revealed either ambivalence or detestation, leading the vast majority of House members in competitive races (36 out of 44) to come out against the compromise.
Most House Democrats voted yes. Most House Republicans voted no. In a Democratic chamber, that still should have been enough to pass the bill, only Speaker Nancy Pelosi appears to have cost the deal a couple of dozen votes at the last minute with some intemperate remarks. Thank goodness for that, and for the bipartisan majority that ended up making the right call.
There is virtually no problem so severe that it can’t be made worse by the hasty action of panicky politicians. The housing bubble and mortgage meltdown were themselves the product of years of injudicious public policies. It may still be necessary for the federal government to take dramatic steps to head off immediate financial calamity, but they need not involve policies that essentially punish well-managed banks (by bailing out their failed competitors) and force taxpayers to purchase securities that no one will voluntarily buy.
A unifying element of these two stories is a failed political attempt to wipe away economic realities, either by artificially holding gas prices low or artificially boosting bank stocks with taxpayer subsidy. Prices convey information. We ignore them at our peril.
Just as politicians ignore the public’s ire at their peril.
Hood is president of the John Locke Foundation.