Where’s the learning curve? | Ott Observations

One of the pillars of traditional Republican conservative thinking is to oppose “big government.”

The concern is that government regulation unnecessarily burdens our economy with rules and costs.

After the financial crisis of 2008, President Obama signed the Dodd-Frank Act, establishing new rules for banks to avoid another such crisis. Tremendous U.S. government financial help was required to prevent a complete collapse that would’ve mirrored the Great Depression.

At the time, many Republicans mocked the bailout of companies such as General Motors, giving GM the new name of “Government Motors.” The bailout actually saved the domestic automotive production industry, a capability critical to our national defense. 

The auto companies have since paid our government back.

Since 2008, Republicans and bank lobbyists have been working to roll back these new regulations. Last month, Silicon Valley Bank failed. Banks fail because they make high-risk loans and they don’t keep enough money handy to meet withdrawal demand – all in the interest of maximizing profit.

In other words, they take too much risk with your money.

The Dodd-Frank Act required “stress tests” to determine if a bank was taking on too much risk. A deregulation act in 2018 exempted banks like Silicon Valley because it wasn’t “too big to fail.”

Much of the money in Silicon Valley Bank came from billionaire entrepreneurs and venture capitalists such as Elon Musk of Tesla fame and David Sacks of PayPal. These business titans aggressively speak out against big government and regulation.

Did they quietly take their losses in the spirit of risk in a free market economy? No, they appealed to the government to insure ALL of their money, far beyond the $250,000 limit of federal deposit insurance.

Last fall, Florida Republican representatives in Washington voted to reduce funding for FEMA, the federal agency that provides natural disaster relief. 

Merely weeks later, Hurricane Ian cut one of the most destructive storm paths ever across Florida. Florida’s two Republican senators immediately started appealing for more federal help than usual due to the severity of the storm.

The Deep South is dominated by anti-big government conservatives, who also oppose clean environment regulations because of their burden on the economy. 

An increasing number of more severe hurricanes and tornadoes continually ravage the South, requiring billions of dollars of disaster relief.

In the winter of 2021, the power grid in Texas failed due to the extreme cold of successive winter storms. It was the worst infrastructure failure in Texas history. Over 200 people died. 

Texas’ power grid was separate from the national power grid to avoid federal oversight such as winterization preparation. 

Texas senator Ted Cruz is one of the leading voices against big government. His response to the power failure was to take his family on a vacation to a Mexican beach.

There used to be a popular bumper sticker that said, “Stuff Happens” (actually a coarser word was used). If banks and utilities and corporations maximize profits by assuming a best case scenario, they are doomed to fail because something bad is going to happen sooner or later. We all suffer when this happens.

Repeatedly, the same conservative voices in government and industry that oppose big government expect big government to bail them out when they haven’t prepared for stuff happening. You would think we would have learned a lesson by now, that we can’t trust profit-driven entities to make good risk management decisions. 

If our government has to bail them out, then our government also has a right to impose some rules to avoid the worst consequences.

I think we can all agree we need to consider government intrusion and regulation with some healthy skepticism. (That applies to personal liberty issues as well, but that is a topic for another day.) Yet we’ve already experienced too many lessons that some regulation is necessary.

As citizens and voters, we own this. We can continue to vote for anyone who says “I’m against big government,” or we can favor someone who can explain in detail when regulation is necessary and when it is too much. 

As for me, I’m tired of learning the same lesson over and over again.

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Bill Ott

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