Surprise: The TARP is Working

Politics today is more about manipulating the minds of voters for the purpose of defeating the other party, than it is about speaking the truth and seeking the national interest.

Take, for example, what is commonly called the bailout bill. The conservatives in the Republican Party and the tea-bag zealots have cast it as a corrupt, budget-busting handout to greedy bankers on Wall Street. Utah’s Republican Party dumped Senator Bob Bennett because he voted for it. Conservatives in both parties lament that it will bankrupt the nation and our children’s children will pay the price of disastrous deficits.

This is a common view on main street, but what are the facts? Zachery Roth wrote in Talking Points Memo that now, 19 months after Congress voted to spend $700 billion on the Troubled Asset Relief Program, we are starting to get a sense of the true cost and effect. “When you look at the amount of money that the government stands to make back— not to mention the widespread expert view that the bailout succeeded in its prime purpose of stabilizing the economy— it could be that we’ve been able to rescue our economy from the brink of depression for a relatively low price.”

Roth offers some facts: The cost to the taxpayers was not $700 billion, but less than $500 billion. Approximately $217 billion of that has been returned, and the Department of Treasury now estimates that the final cost will be less than $120 billion.  He reminds us that the bailout’s purpose was to prevent a complete collapse of the American financial system, and he quotes Barry Eichengreen, a professor of economics and political science from the University of California in Berkeley: “TARP enabled the banks to earn their way back to solvency… and prevented the financial system from falling off the cliff.”

Tyler Cowen, a Libertarian and an economics professor from George Mason University, opposed the TARP, but now believes “The bailouts were a good idea… (without them) we would have had more failed banks, very strong deflationary pressures, a stronger seize up in credit markets than we had… and a climate of sheer political and economic panic.”

I agree with Roth’s conclusion that even though “irresponsible bankers, after years of lax government regulation, came close to tanking the American economy” and had to be rescued by ordinary Americans who took the brunt of the recession; even though those same bankers are working to water down efforts to strengthen oversight and regulation,  “we were able to stabilize the economy for what could be a fraction of the cost originally contemplated.”

Were there abuses? Yes.  Is it unjust that bankers escaped whole while so many people suffered? Yes. But let’s deal with the abuses and injustices rather than condemning the entire effort. A brave and difficult decision was made amidst chaos, and a program was implemented rapidly without the time to lay a solid foundation. Against all odds, the result appears to be one that saved the nation from financial catastrophe.

These are the facts and the truth, but self-serving political framing has created the opposite view in the minds of many. To read Roth’s complete story go to and click on “Bailout: The Best Program Evaah?”

Gulf Oil Spills and Coal Mine Deaths: Time for Action

It is time for the United States to stop shilly-shallying around the edges of environmental policy, bite the tax bullet, and lead world to a sustainable energy future.

The disastrous environmental, economic and social consequences of the oil spill in the Gulf of Mexico ought to shake us to our senses. Add this Gulf crisis to the deaths in West Virginia coal mines; plus the environmental degradation of mountains and water that are by-products of mining coal; plus the national security implications of our addiction to oil; plus the life-changing effects of burning fossil fuels on the world’s climate… and the sum is clear: The time for bold action and a firm commitment to an alternative energy policy is now. Right now! This minute!

Thomas Friedman wrote in his New York Times op-ed column that “the only meaningful response to this man-made disaster is a man-made energy bill that would finally put in place an American clean energy infrastructure that would set our country on a real, long-term path to ending our addiction to oil.”

I agree with Friedman, but there are powerful forces with deep pockets and a multitude of lobbyists aligned against major reform. These forces range from mining and oil interests, power producers, and the anti-tax zealots. They are committed to defeating or emasculating any initiative that would substantially alter the status quo.

But the dual tragedies of West Virginia coal and Gulf oil might have produced the perfect public opinion storm, a moment that must be seized.

A place to start is the bi-partisan bill in the United States Senate that, according to Friedman, “would set a price on carbon, begin to shift us to a system of cleaner fuels, greater energy efficiency, and unlock an avalanche of private capital to the clean energy market.” But this bill is only a starting point.

I believe it needs to be strengthened by adopting a two-stage process. First, set a clear goal that commits the United States to a date certain for eliminating our dependence on fuels that destroy the environment and endanger national security.

Secondly, establish an aggressive timeline with mandated action steps that move us to that goal. The action steps would include a multi-year timetable for phasing out reliance on fossil fuels while ramping up new energy sources; and, setting a price for fossil fuels that accurately reflects their true cost. Then, impose a carbon tax that would increase annually until the price reaches the cost. The proceeds of the tax could be dedicated to alternative energy innovation.

Tax is a bad word in political circles, but we are currently paying a hidden tax through subsidies that hide the real cost of our energy consumption. This includes (according to Energy Security: Toward a New Foreign Policy Status by Jan Kalicki and David Goldwyn) the cost of maintaining a military presence in the Middle East; the health cost caused by carbon emissions and other pollutants; the cost of cleaning up polluted land, water and air; maintaining a transportation infrastructure for moving fuel; and the economic costs that volatile energy prices impose on the competitiveness of U.S manufacturing.

Kalicki and Goldwyn argue that “the disconnect between what Americans pay for energy and what it really costs has led to political deadlock… The failure to achieve basic changes has plagued Democrats and Republicans alike, both of which have feared antagonizing domestic producers and manufactures or risking consumer retaliation at even the mention of increasing taxes.”

They argue, therefore, that the legislative response is weak, and is limited to “shortsighted discussions of industry subsidies, or continuation of the war between producers and environmentalists.” Even though their book was written in 2005, it paints an accurate picture of the current process in Washington. Neither the American people nor our policy makers seem willing to think beyond the immediate interests of various constituencies.

Politicians in power, for instance, want to stay there and those out of power want to return, common good be damned; the primary concerns of business are shareholder return and customer price; and consumers want to maintain and improve their existing standard of living. The first group is subjected to powerful lobbying from the second, and the third is targeted with partisan campaigns of fear, obfuscation and manipulation by the other two.

Meanwhile, the United States is becoming more and more vulnerable as it increases dependence on energy imports, and is thus less able to deal effectively with threats from the Middle East. We are in danger of falling into energy insecurity, and being mired in constant conflict with unstable and badly-governed states.

We need leaders of courage who will act as statesmen rather than partisans. We need leaders who will seek a balanced environmental solution that preserves the interest of the nation, ensures long-term environmental sustainability, protects national security and stimulates economic prosperity… and that earns the United States a mantle of world leadership on an issue that affects every corner of the globe.

That leadership responsibility, I believe, has landed squarely in the Oval Office. President Obama needs to embrace it, seizing a moment when the public is acutely aware of the economic and environmental consequences of our current energy policies. He should begin with the current Senate bill and forge it into strong, bold and comprehensive legislation.

As Friedman pointed out, “This bill has no chance to pass unless President Obama gets behind it with all his power, mobilizes the public and rounds up the votes. He has to lead from the front, not the rear… this oil spill could well become the most important leadership test of the Obama presidency.”

Tom Wright, a theologian and Church of England bishop, once said that leaders must grab the nettles, or resign themselves to a long walk around the thicket. This issue is a thicket full of nettles and it will take immense political courage to take hold of it. The alternative, however, is a long walk around a never-ending crisis, and our grandchildren’s children will pay a staggering price.

So let’s quit shilly-shallying around the edges of environmental policy, bite the tax bullet, and lead world to a sustainable energy future.

A Duty to Balance: Serving as a Corporate Director

During my 19 years on the board of a large, publically held corporation, I have been in many discussions with my colleagues about whether or not the sole responsibility of a director is to enhance shareholder value.  I argue that while this is an important part of our duty, we also have a responsibility to other stakeholders: customers, employees, and the welfare of the community and state we do business in.

This subject is examined in a recent article in The Economist, a weekly magazine that does a superb job of covering world politics, business and economics. The article cited Jack Welch as the icon for the “idea that a firm’s sole aim should be maximizing returns to shareholders.” This idea, according to the magazine, “has dominated American business for the last 25 years, and was spreading rapidly around the world until the financial crisis hit, calling the wisdom into question.”

Welch, himself, now questions it: “On the face of it,” he said, “shareholder value is the dumbest idea in the world.” The Economist also quotes a Harvard Business Review article by Roger Martin, Dean of the University of Toronto’s School of Management.  Martin wrote that focusing on maximizing shareholder value is a “tragically flawed premise. It is time we abandoned it” and focus instead on a “customer-driven capitalism” with the goal of increasing customer satisfaction.

My view is that the debate of shareholder vs. stakeholder is a false one, and that a corporate board of directors has a duty to balance the two. They are not mutually exclusive.

Customers who believe that a company listens to their concerns, understands their needs and seeks to serve them will be loyal consumers. Well- trained employees who work in a healthy environment, receive fair compensation, and are treated with respect will have a professional dedication that goes beyond just showing up for work. Corporate investments in a community’s economic development, education system and general wellbeing will make for a better business climate. These stakeholders have a direct effect on the firm’s bottom line, thus affecting shareholder value.

For me the answer isn’t one extreme or the other. Shareholders and stakeholders (both groups, by the way, include management and board members) are inextricably bound together, and value for one is value for the others.

Postcard from Arizona

Thomas Wolfe wrote that a guy can’t go home. I, however, left Arizona for Asheville, NC in 1995, and have returned eight to ten times a year on business. It is the state itself that proves the rule: In 1986, Arizona abandoned its center-right roots for a home in far-right politics and has never looked back.

The political center of the state now rests not in the tradition of Goldwater and Udall, but in an angry brand of conservatism that worships guns and hates liberals, officially embraces racial profiling, and deals with budget issues by eliminating health care for poor children and slashing Medicaid eligibility (both of which might be restored owing to the prospect of losing federal subsidies).

It was not always like this.  When I came to Arizona in 1978 as part of Governor Bruce Babbitt’s cabinet, it was a state that did politics the way politics ought to be done. This was a time in which a progressive governor and a conservative (moderately so by today’s standards) legislature combined to work through a myriad of difficult issues.

Arizona’s elected leaders, business leaders and social advocates grappled together for eight years to find solutions for unprecedented prison expansion, the implementation of Arizona’s own model of Medicaid, tough tax and budget issues, and rapid population growth that affected the state’s physical, transportation, environmental and water infrastructures.

While there were often sharp differences of opinion, there was always a sense that we were on the same page… that we were working together to find the best long-term solution for the state. My colleagues and I spent hours with business leaders and with legislative Democrats and Republicans in search of consensus solutions to seemingly intractable problems. Our shared goal was to ensure Arizona’s future as a vibrant, compassionate and prosperous state.  We had a mutual respect for one another that kept our disagreements civil.

Then Arizona’s political ground shifted abruptly with the election of Evan Mecham in 1986. His own party eventually impeached him, but the newly-elected Governor Fife Symington continued the rightward sprint… and he was eventually forced to resign from office when convicted of multiple felonies (and later pardoned by President Clinton). Since those days, the political atmosphere of Arizona has been and continues to be poisonous.

The state is the home of border vigilantes; of Sheriff Joe Arpaio (who brought back chain gangs for men and woman prisoners, moved prisoners into tents, commissioned retired people to patrol the streets looking for prostitutes, and accused members of the County Board of Supervisors who disagreed with him of crimes); of low rankings in almost every social indicator; of a law that allows a person to carry a gun without a permit and without training; and now of a law that makes it a state crime to be in the United States without proper documentation, and orders local law enforcement to demand documentation of legality from anyone an officer “suspects” might be in the country illegally. The subtitle of this law ought to be “If you’re brown, you go down…”

John McCain, Arizona’s senior senator, has fallen victim to this atmosphere. He abandoned even a façade of reasonableness by repudiating his previous commitments to campaign finance reform and a comprehensive immigration policy. He has even denied the core of his self-proclaimed identity— that of a maverick— as he desperately tries to cling to his seat in a primary contest with J.D. Hayworth. Hayworth is a former Congressman who doesn’t believe that Barrack Obama is a U.S. citizen, and who proclaimed that gay marriage would lead to a man marrying a horse. Only in Arizona!

The prevalence of anger, fear and irrational self-defeating behavior is the reason I left Arizona 15 years ago… and not just because I deplored what the state was becoming. I also deplored what I was becoming: Too much like them. I traded angry liberal words for angry conservative words, playing my role in the diminishing of thoughtful dialogue. I needed a sabbatical, a chance to renew my vision and to moderate my tone. Little did I know that folks like Newt Gingrich, George W. Bush, Dick Cheney and a minion of arch-conservative Republicans would take Arizona’s model of public conversation to the national level.

Arizona is a beautiful state, filled with the wonders of high deserts and grand canyons, and an ethnically diverse population. But politically it has become a state in constant flux. Since the election of Raul Castro in 1974 and his subsequent resignation to become the United States Ambassador to Argentina, Arizona had a constant turnover in the governor’s office. Only Bruce Babbitt and Jane Hull left the office after completing their terms. Three were elevated to the position when a sitting governor (Mecham) was impeached, forced to resign (Symington), or departed for another job during her second term (Janet Napolitano).

Think about that: from Castro to today’s former Secretary of State-become-Governor Jan Brewer, Arizona has had nine leaders in 35 years… an average of less than one four-year term each. No large organization— whether business or government— can function well and consistently with that kind of turnover in the executive office.

My heart hurts for the people of Arizona. Most of them are thoughtful conservatives who care deeply about the future of the state, and  whose values are not reflected in the policies of their elected leaders. For example, when Governor Mecham made Arizona the first state in the union to repeal a Martin Luther King Jr. holiday, the citizens rose up and made Arizona the only state to establish the holiday through a vote of the people.

When, year after year, Arizona Governors and legislators refused to provide quality, early childhood education, a vote of the people established the program and a funding source through a citizens’ initiative (which the current legislature is trying to repeal). Rapid transit was built in Phoenix through a vote of the people, and the voters used an initiative to establish public funding of candidates for election.

From the days of Congressman Udall and Senator Goldwater, to Governor Babbitt the politics of Arizona were civil and conservative-progressive. I believe that the civil, conservative-progressive ethic still prevails in the hearts of the people of Arizona— particularly its business leaders— but elected leaders are betraying rather than upholding those values. There seems to be no sign that they are willing to return to the more moderate political home of an earlier day, and maybe that means it is finally time for me to admit that I can’t go home, either.

Who Are These People?

When did it become OK to shout out rude, racist and hate-filled epithets in America’s public square? How does a rational person respond to people so filled with fear and anger that they accept distortions and flat-out lies as absolute truth? How can a nation survive when one set of leaders demonizes its opposition with personal and vitriolic attacks on those with whom they disagree? Continue reading “Who Are These People?”