A Gentle Reproof for Bill O'Reilly
Litigation isn't poker. It's chess. You have to think three or four moves ahead.
Economics is like that, too.
Nothing is ever actually ceteris paribus. All the little economic variables are always moving and changing. The world's largest economy (ours) is all interconnected. Touch one gizmo, and you affect several other gizmos. All the little widgets talk to each other.
It's even more so with our even larger, globalized economy.
As the Heritage Foundation said in a recent debate over tax policy, "[s]mall decision changes create feedback effects that can snowball and change the path of the entire economy." And, in a globalized economy, corporations can -- over time -- simply take their assets and go elsewhere.
The most recent opinion-leader to fall into this trap of thinking statically, rather than dynamically, is Fox News's Bill O'Reilly.
There he was on The O'Reilly Factor on Thursday night, singlehandedly solving the gasoline price spike. No problem. O'Reilly's on the case. He even said his plan is how the GOP presidential candidates could show leadership and seize the initiative from Mr. Obama.
What, there's actually no shortage of petroleum or petroleum products in the United States? Or on world markets, either? Wait, this price spike isn't the result of the law of supply and demand?
To the contrary, sez Bill O'Reilly to "the largest audience in cable news," what's really going on here is good old-fashioned greed. The American oil companies -- saddled with excess supply after a warm winter -- are selling their products overseas (especially to China) where they can make more money.
No problem, sez O'Reilly. I'll see your $4.00-a-gallon gasoline and call you. You brought a knife, Mr. Oil Executive? Fine. We'll bring a gun.
"Hey, I can fix this."
Bill O'Reilly knew just what to do. Invite Big Oil's CEOs down to the White House for a little chat -- rather as President Obama once did the Big Three automakers and the Wall Street bank CEOs. And just give them, so to speak, the Full Chicago Treatment.
Get out the baseball bats.
Slap an export tax on petroleum products. Capture Big Oil's extra profits, so the incentive to sell foreign rather than domestic is eliminated. Mention that all of Big Oil's drilling permits -- especially future ones -- are subject to the whim of the U.S. secretary of the interior.
"Nice drilling permit you have there. I wouldn't want anything to happen to it."
Yes. And it won't work, either.
O'Reilly, I believe, is honestly mistaken. Unlike Charlie Rose, who had Daniel Yergin (author of The Quest: Energy, Security and the Remaking of the Modern World) on the other night and generated neither heat nor light, Bill O'Reilly took a hard whack at the ball. Indeed, Bill O'Reilly's arguing, in effect, that President Obama should put this latest crisis to use by taking even greater control over yet another sector of the American economy.
But he's thinking of the wrong analogy -- drawn from a different time and a very different American economy. He's remembering President John F. Kennedy and Big Steel.
Back on April 10, 1962, America's major steel companies (all but one [USX] now extinct) decided to raise the price of steel by the same amount. Big Steel's price increase lasted four days. JFK brought the power of his office to bear -- call it the O'Reilly Solution -- and Big Steel backed down. Attorney General Bobby Kennedy, by all reports, did a credible imitation of Al Capone disciplining a wayward capo with a baseball bat.
That's not today's global economy.
Today's global economy is American companies doing their IPOs overseas to get out from under Sarbanes-Oxley and foreign corporations foregoing listing on American stock exchanges. It's British companies moving out of the City of London to Singapore, Dubai, and Hong Kong to get away from high taxes on executive bonuses. It's French investment bankers commuting to the City of London to avoid working under onerous EU regulations.
The other analogy -- which I'm sure Bill O'Reilly remembers -- is Richard Nixon's August 1971 announcement of wage and price controls. They didn't work, either.
So, Bill: you wanna slap export controls on refined petroleum products?
Do you have any idea where this leads? There won't be another refinery built in the United States. We will end up importing all our refined products to escape the controls. If the only way U.S. oil companies can reap the world price is to sell overseas, then you'll see this entire industry migrate out of the United States.
And almost all the high-paying jobs will go, too.
In twenty years, the U.S. petroleum industry will have moved overseas, corporate headquarters included, because the U.S. laws and regulations which Bill O'Reilly is suggesting will handicap them vis-à-vis their competitors. Their American shareholders will support these moves. All the high-paying jobs which used to be in Texas, Louisiana, and Oklahoma -- not just the headquarters jobs, but also technical services as well -- will be in Dubai, Singapore, Holland, and all sorts of havens.
Natural resources is a global industry. The natural resource companies headquartered in the United States don't need to be headquartered in the United States. It's that simple. Controls always have this effect.
Bill O'Reilly is a thinking man, a well-educated man, and a highly intelligent man. Last night's Talking Points Memo was not his best effort.
I'm sure Bill O'Reilly will think this through.