FLIP FLOPS?

FLIP FLOPS, June 24, 2008

A lot has been made this past week over the apparent “flip flops” that both major candidates for President experienced this week. Senator McCain decided to support off shore drilling and Senator Obama’s decided not to take public money to support his campaign. A lot of the media pundits have been relatively quiet on these decisions. Why?
Senator McCain’s decision is a smart one, but not enough. With current gas prices of over $4 per gallon, most Americans are feeling the squeeze of higher energy costs. I filled up my Ford Escape yesterday at $4.129 a gallon and it cost me over $55. I currently don’t drive a whole lot, so it is not a huge issue for me at this point. However, if I needed to fill up each week, this would begin to have a serious impact on my personal finances. Senator McCain switched his position this past week on this issue. I am surprised that more members of congress have not done the same. Over the past ten years, a number of times legislation has been pushed to diversify America’s energy policy. Drilling in ANWAR was passed in 1997 but vetoed by President Clinton, who said that the legislation would produce no new oil for five to seven years. Well if that legislation had been signed into law, today we would have about an additional one million of barrels of oil on the market. While this is about five percent of the US daily consumption, this would still reduce the overall cost of a barrel of oil. According to a recent editorial by Michigan representative, Candice Miller a co-sponsor of the No More Excuses Energy Act, the legislation would “lift the moratorium on exploring for oil on the Outer Continental Shelf, which could produce as much as 17 billion barrels of oil. It would also open the Artic National Wildlife Refuge in Alaska for oil and natural gas exploration, which could produce as much as 1 million barrels of oil per day for several decades.”
Is drilling to solution to all our current energy problems? No, the US needs to diversify it energy consumption. We need to see an increase in oil production, natural gas production, nuclear energy development, and renewable energy development. None of these will reduce the cost of oil today however. These are all long-term solutions to the current problem. While the announcement of additional drilling either in ANWAR or on the Outer Continental Shelf might reduce the price per barrel some since the anticipation of increased supply, it will not have a dramatic impact. That seems to be the problem in Washington these days. There is no short term, quick solution that will drop the price per barrel closer to the $40-50. Senator McCain’s statement got a quick reaction as a “flip-flop” from Democrats, and the environmental lobby. Senator McCain should basically come out and say, “You’re right; I did change my mind on this issue. When I had previously stated my opposition, the price of gas was not over $4 per gallon. American families were not struggling to figure out how to pay the increased cost of gasoline with other increases in basic necessities, like food. The current situation demands that we look at alternative methods of satisfying the increased demand for gasoline.”
The US currently does not have the ability to inexpensively convert most renewable sources of energy into usable energy. I explored the cost of adding solar panels to my house to reduce the cost of heating my home. I was told that the cost would be about $15,000 to add a few solar panels to my roof and it would take about seven to ten years to payoff this cost with respect to the energy savings. Can we run our cars on batteries? Not yet, Detroit has not yet figured out how to develop an engine that will run on a renewable energy source as effectively and as long as a normal gallon of gasoline. We have seen an increase in ethanol gasoline, but that has led to an increase in food prices as corn grower’s shift their product away from food to energy.
The US needs to diversify its energy consumption and production. Do we really want our dollars going to the Middle-East or Venezuela in order to support our daily need of oil? No, but we are also not going to be able to produce our daily oil needs domestically. Also, with the amount of oil that developing countries such as China and India consume, the demand for oil is only going to increase. We should start using more renewable sources of energy – solar, wind, biomass so that as we increase our consumption and use of these types of energy, we will continue to develop more cost efficient sources of energy. Senator McCain will likely not be hurt by his change in opinion, but he could have scored a bigger win had he expanded his view on changing the US energy plan. He could have forced Senator Obama to either dismiss the talk as not doing anything to reduce the daily cost of oil (which is what his response was) and putting the onus on Senator Obama to come up with a plan that would reduce gas prices. Obama’s belief that reducing the tax breaks for oil companies or an excessive profit tax for these same companies would do nothing to reduce the cost and would dramatically impact the US economy because they would in fact raise the price of oil.
Senator Obama last week decided that he would not take the $84 million to finance his general election campaign. He decided that he would rather take money from his supporters to finance his campaign. I totally agree with his decision. If the Senator feels he can effectively raise enough money to finance his campaign without taking our tax dollars, I feel that is a great idea. The Senator has shown a remarkable ability to raise money throughout the primary campaign and he should be able to raise in excess of $100 million in about a week. He has over one million current contributors who could all donate to his general election campaign. The Senator’s campaign states that most of his donors are small dollar donors who give less than $200. According to the Center for Responsive Politics, forty-five percent of his one and a half million donors fit into this category. The Obama campaign believes that it will be able to raise a substantial amount of money from its supporters to overcome the change in position.
I believe that the campaign made the right call. Let’s assume that the campaign keeps the 45% small donor base and gets 50% of its primary donors to donate to the general election campaign. Let’s also assume that his small donors give $100 to the campaign while the large donors give an average of $750 to the campaign. He would likely raise over $343 million for the campaign to spend over the eight week general election campaign. This is a low estimate since I would imagine that with the energy on the Democratic side, he would likely get more than 50% of his donors to commit to his general election campaign and I would imagine that at least with his larger donors, they would max out their contributions of $2,300. Could he possibly spend that much money? Sure, he would likely be on TV in most states and he could also finance state operations in states that he may not win, but that could help with the get out the vote operation and help down the ticket Democratic candidates. He could possibly take over the operation that the DNC is supposed to do since he would have the financial capabilities to do so.
This financial advantage would drastically help Obama in that he would not have to conserve any money and would not have to make tough decisions as to whether or not to go up with an ad in a state that he might not win. He could also force McCain to spend money in states that he did not anticipate he would have to spend money in. He could put a number of “safe” McCain states in play and force McCain to make tough choices as to where to spend his limited resources.
I think that a candidate for President needs to have the support of the American people and the best way to measure that support is through financial donations. If a candidate is unable to raise sufficient funds, they are not a serious candidate. The American taxpayer should not be financing such candidates. A candidate such as Obama has shown that he has a broad range of support from across America. He can easily find his campaign and he should. I don’t think that paying for elections is a smart use of American tax dollars. Particularly when the country is facing so many issues including the war of terror, an economic slow down, an energy supply problem, broken infrastructure that desperately needs government action to fix. All of these problems need money to solve and I think it is a better use of our money to work on those problems as opposed to funding a campaign.
While Obama might take some heat and criticism from a few in the press, it is not likely to make a big difference. The 4-1 cash advantage that he likely would have would allow him to focus on other more important issues, like trying to get elected. Hopefully Obama’s decision to not take federal funding for both his primary and general election campaigns will eliminate the need for future candidates to take public financing and instead focus on raising enough on their own to support their campaigns.
Both of these decisions were the right ones to make by the different campaigns. Is anything going to happen due to these decisions, not likely. Is either campaign going to be negatively effected? Not likely. The biggest potential problem would be if either of the campaigns changes their opinion on another issue and it can be turned into a more general theme, much like Senator Kerry found out in 2004.