He'll Be Back

When a high profile politician does something that unites in opposition the party bosses from one end of the political spectrum to the other, it's a safe bet he's looking after the people's interests.  Who can claim this rare accolade?  Step forward California Governor Arnold Schwarzenegger.

Schwarzenegger was one of the moving forces behind a California ballot referendum proposal,  Proposition 14, that was approved in that state's primary election last  week by a majority of 54% to 46%.  Although the political pundits focused on the outcome of a few specific primary contests,  Proposition 14 will likely have a more profound long-term impact on U.S. politics than any individual race, especially if other states follow California's lead.  

Proposition 14 changes the way in which Californians will elect candidates to statewide and Congressional office by replacing the traditional "primary" system with a two-stage general election.  The function of the primary election is to pick the candidates that will represent each party in the general election.   Rules differ from state to state, but the general principle is that a voter has to chose which party primary to vote in, and in many cases must register his or her affiliation with that party on or prior to the primary day.  In many states  a party affiliation,  one registered, can be changed only if the voter complies with certain bureaucratic formalities some time prior to the primary election date.  In place of this system, California will now have a two-stage open election in which anyone that meets the applicable eligibility criteria could stand as a candidate.  The candidates with the highest and second highest votes in the first round would then advance to the second round of voting - even if both were from the same party (or, indeed, from no party at all).

Supporters of the measure claim it will makes politics less partisan and allow voters to focus on the qualifications of the individual candidates.  It will empower individual voters at the expense of party bosses, increase voter turnout at elections and sharply reduce the need for candidates to pander to extremist fringe groups in order to get elected.  It will help open up the system to candidates who are not lifelong professional politicians and aren't beholden to others once they get elected.  I agree, and so apparently do the party bosses - that's why they opposed it, with dire warnings that Proposition 14 will not only increase the costs of elections but will also eliminate freedom of choice and abridge the freedom of speech!  Such threats could only be made in the Kafkaesque world of American politics, where the  "freedom" political parties value most is the freedom they currently enjoy to control the outcome of elections.

To understand the absurdity of the primary system the bosses want to retain, consider the primary election in which I had the opportunity to "vote"last week.  In my electoral district there were seven positions on the primary ballot, ranging from township government to the U.S. House of Representatives (neither of New Jersey's U.S. Senators face re-election this year).  One the Democratic side of the ballot, all seven positions were uncontested - i.e., there was no choice for the voters to exercise.  It was a ballot Joe Stalin would have been proud of.  It was almost as bad on the Republican side; only one position was contested.  The situation was similar throughout the state - which is why the turnout was dismal - only 7 percent in the county I live in.  Although voters seem to be sick and tired of politicians in general, the re-election rate for Congressional incumbents is over 90 percent.  Blame that on the grip that the party machine exercises over the primary process. 

Even where there is a genuine primary contest, primary elections tend to attract a lower voter turnout, and thus the party activists exercise disproportionate influence over who runs in the general election.   True, a politician who loses a primary can run as an independent in the general election;  Joe Lieberman did, and won.  But it rarely happens - challenging the official party candidate in a general election usually signals the end of a political career.  And because middle-of-the-road and unaffiliated voters are less likely to vote in a primary, the major party candidates tend to favor the extreme wing of their party.

This is particularly true in the case of the Republicans, where the party organization has hijacked in recent years by extremist fringe groups like the so-called "Moral Majority" and more recently the Tea Party crowd.  Such is the new found influence of the Tea Party that Republicans are finding it increasingly difficult to pick candidates that appeal to the key swing voters who often decide the outcome of general elections.   Rand Paul's recent victory in the Republican Senatorial primary in Kentucky is a case in point.  A self-defined libertarian (albeit one now officially disowned by the Libertarian Party), Rand won the primary with the strong backing of the Tea Partiers.  He's an interesting character; in the warm afterglow of his primary victory, he confided to interviewers his view that private business owners should be free to discriminate against minorities because, after all, it's their business.  Following the predictable public outcry, the Republican party dispatched its spin doctors to muzzle Mr. Paul, who has since wisely confined his media appearances to the likes of Fox News, where sympathetic hosts have given him the opportunity to explain how his comments were "misunderstood", "taken out of context" and misrepresented by the "liberal media".  Republican  party bosses may wishing they'd had a Proposition 14-style system in place in Kentucky.  They are now stuck with Rand Paul and Kentucky Democrats must be licking their lips in anticipation of the fall general election.

Democratic bosses in Pennsylvania dodged a bullet when their efforts to clear the way for aging political turncoat Arlen Specter came up short and primary voters opted instead for Rep. Joe Sestak.  The Democratic "leadership" tried everything to keep Sestak out of the race - Obama even offered him a cushy post in the Administration if he would stand aside - but he stood his ground, and the party, despite itself, will have an engaging and well-qualified candidate on the ballot in the fall, someone who represents the Democratic Party's future, not the Republican Party's past.  Sestak's case, unfortunately, is the exception not the rule.

But back to California and Arnold Schwarzenegger.

It's rare for politicians to put the electorate's interests ahead of their own, and cynics may see more than a hint of self-interest in Schwarzenegger's support for Proposition 14.  Now in his second term as California's governor he is ineligible to run again for re-election in November, and will be looking for future employment opportunities.  He may fancy his chances against incumbent U.S. Senator Dianne Feinstein, who has to face the voters in 2012.  Schwarzenegger knows he likely could not win the Republican nomination in a conventional primary system - he's said as much.  He's viewed as too liberal by many of the party activists and in particular is no friend of the nut jobs in the Tea Party.  But he does have appeal among moderate democrats, especially of the well-heeled variety, among whom his marriage to a member of the Kennedy family and his status as one of the "Hollywood elite" are seen as positive credentials.  Those moderate democrats wouldn't be eligible to vote in a Republican primary, but in a two stage general election, with a higher turnout, and no voting restrictions based on registered party affiliation, my money would be on Schwarzenegger to advance comfortably, not just to the second stage of the election, but on to Washington D.C.  

It's early days yet, but don't be surprised to hear Arnold reprise his famous catch phrase as he leaves the governor's office early next year.   "I'll be back".

Looking for British Ass (to Kick)

If you still need evidence of the demise of the so-called "special relationship" between Britain and the United States, look no further than the irrational torrent of invective now emanating from the Obama Administration over the oil spill in the Gulf of Mexico.

Let's be clear.  The spill is a major ecological disaster that continues to get worse, rather than better, by the day.  It threatens the livelihood and way of life of thousands of Gulf Coast residents.  But for Barack Obama, it is now also becoming a major political disaster, as more questions are raised about the government's response to the spill, and the lax regulatory oversight that may have contributed to the disaster. It's worth remembering that only days before the explosion occurred, Obama had announced major reductions in the restrictions on offshore drilling.  This change in policy, which shocked many rank-and-file Democrats and delighted and surprised the oil industry, purportedly followed an exhaustive review of safety and regulatory issues.  Subsequent events suggest this review was not nearly exhaustive enough.

Recognizing the mounting public dissatisfaction with his own performance, Obama is attempting to jump on the growing anti-British bandwagon and has ratcheted up the rhetoric against BP and its embattled CEO Tony Hayward.  In an interview this week he laid into Hayward personally, advocated his dismissal, suggested that BP had "cut corners" on safety and added that he wanted to know "whose ass to kick".

It's too bad Obama didn't put on his tough guy act when health care legislation was being debated.  Had he "kicked ass" then, we might have ended up with something better than the insurance industry bailout that was cynically packaged up as a "historic" reform.  But the recent attack on BP was a crude and self-serving performance; it displayed a tone unworthy of a President of the United States, and betrayed the mentality of a politician more interested in popularity ratings than the facts.  This kind of language does nothing to contribute to cleaning up the Gulf of Mexico; but more important, it also assumes that BP is the sole culprit, a fact that is, as yet, far from clear.  So let's start by getting some facts straight.

First, we know that the blowout occurred as workers were finishing the process of pouring cement into the cavity between the side of the well and the pipe, a process known as "cementing".  For reasons not yet clear, the cement ruptured or did not set properly, causing a highly combustible mixture of oil and gas to shoot to the surface.  The cementing was the responsibility of oilfield services company Halliburton, a U.S. public company based in Houston, Texas.  The recent disaster bears more than a passing similarity to a blowout in the Timor Sea in August of 2009, in which tens of thousands of barrels of oil escaped over a ten-week period.  Haliburton was also responsible for cementing that well.  An investigation has not yet determined fault and Halliburton has refused comment.

Second, when the rig crew attempted to activate the blowout valve that is supposed to prevent this type of disaster from happening, the valve failed.  Again, the reasons for the failure are not known, but we do know that the valve was manufactured by Cameron International, another U.S. public company, also based in Houston. 

Third, the rig involved in the the accident, the Deepwater Horizon, was owned not by BP but by a company called Transocean Ltd.  Transocean is also a U.S. company, or at least it was until  December 2008, when it entered into a series of corporate transactions the effect of which was to reconstitute it as a Swiss entity, presumably to benefit from a more lenient tax regime.   However, Transocean maintains its operational office in Houston, and its shares are listed on the New York Stock Exchange. Transocean had flagged the Deepwater Horizon in the Marshall Islands, a "flag of convenience" state where regulatory requirements are less onerous.  Of the 126 workers on the rig at the time of the explosion, only 8 were BP employees.  Questions have been raised as to whether Transocean had crewed the vessel adequately at the time of the accident.

Fourth, BP is not even the sole owner of the drilling concession in question; a 35% share is owned by Anadarko Petroleum Corporation, another U.S. publicly traded company also based in Texas.

As the concessionaire, BP is legally responsible for damages resulting from the Deepwater Horizon disaster and it has maintained from the very outset that it will honor all legitimate claims.  But liability and culpability are different things, and we may not know for many months who was to blame for the disaster.  It may well be that the accident was the combination of a series of unrelated events, and that all parties bear at least some responsibility.  So why is the Obama administration beating up on British Petroleum, and ignoring the other companies involved?  It's hard to avoid the conclusion that Obama feels a lot braver playing the role of tough guy when taking on a foreign oil company than he would one of its U.S. counterparts.  He's ready to "kick ass" at BP, but apparently afraid to ruffle too many feathers in the executive suites at Halliburton.

Administration flunkies are marching to the same tune.  Influential Democratic Congressman Anthony Wiener asserted that  anyone speaking on behalf of BP with a British accent is lying to the American people.  Lackluster Interior Secretary Ken Salazar proposed that BP be prohibited from paying a dividend that has already been declared, and which it is legally obligated to pay, in order to compensate U.S. oil industry workers who have been furloughed as a result of the Administration's moratorium on offshore drilling imposed following the recent blowout.  That'll show those goddamn Brits, right?  Hardly.  It is in fact an astonishingly stupid and irresponsible suggestion, but one that nonetheless caused a further sharp decline in BP's share price this week.  Salazar and his boss should bear in mind that roughly 40 percent of BP's stock is owned by Americans; it has always been seen a "blue chip" investment, so it's safe to assume that many pension funds - American pension funds - own it.  Many individual investors - American investors - rely on the regular and healthy dividends that BP pays. Of BP's 80,000 employees worldwide, 29,000 are in the U.S., almost three times as many as in the U.K.  Punitive confiscatory sanctions against BP would harm American workers and investors as much if not more than the British.  And as to the moratorium itself, the Deepwater Horizon disaster didn't make future accidents more likely - but it did raise legitimate concerns as to the effectiveness of  regulatory oversight of the oil industry, all of which is the responsibility of - you guessed it - Ken Salazar.

The tragedy in the Gulf raises many questions, not least of which is why there was no contingency plan for such a disaster.  The various containment apparatus used in an effort to stem the flow of oil had to be designed and built after the blow-out occurred.  BP 's Tony Hayward has been his own worst enemy - some foolish comments in the aftermath of the the explosion created the impression that he failed to grasp the magnitude of the problem. But to his credit he hasn't hidden away in his London office leaving U.S. underlings to take the heat.  He has been "front and center" in the disaster response and next week faces the daunting task of testifying before the U.S. Congress.  One can criticize BP's effectiveness in response to the explosion, but I am not convinced any other company would have done better.  If found to have acted illegally or negligently, BP should be held accountable to the fullest extent of the law. But culpability must be determined by legal process, not Presidential finger-pointing. Obama's recent performance creates grounds for concern that BP may unfairly singled out in the criminal investigation and prosecution that the Administration is apparently already planning.

His public statements suggest that David Cameron is more intent on currying favor with the administration in Washington than in defending a British company against possible punitive and illegitimate sanctions. A performance Tony Blair would surely be proud of.  One can only hope that, in private conversations with the President, Mr Cameron will point out that the same rationale underlying the threatened U.S. measures against BP would justify similar European sanctions against the U.S. financial institutions whose reckless and fraudulent lending practices triggered an economic disaster that will cost many times more to clean up than the oil spilling into the Gulf of Mexico.  And as to Obama's threat to "kick ass", Cameron would do well to suggest to the President that the current crisis is better addressed with the brain than with the foot.