Know why McCain wants to distance himself from former Senator Phil Gramm? It's not because of Gramm's obnoxious remarks calling Americans "a nation of whiners" who are in "a mental recession." Those remarks were so ascerbic that they may've been made just to give McCain an excuse to distance himself from Gramm. This issue is a lot deeper than it looks on the surface.
When Gramm was a Senator he was Chairman of the Banking Committee. He pushed through the legislation known as the "Enron Loophole." This loophole allowed US investment banks to bypass Federal regulations governing futures trading, and is the reason why investment banks were able to falsely inflate the prices of oil, wheat, corn and other commodities through massive futures trading, causing your costs of gas, heating oil and food to go through the roof.
Gramm also created the Gramm-Leach-Biley Act, which got rid of the laws that seperate banking, insurance and brokerage activities in America. The Gramm Act was touted as a new way to protect consumer privacy, but the real meat on the Act's bones was banking deregulation. Essentially, this Act did away with laws written after the Great Depression to protect us from another Wall Street/Banking Industry collapse. That's right, Gramm stripped the system of it's safe guards nine years ago, and guess what? The value of the dollar has nose-dived, four major economic institutions have failed, Wall Street is unstable, and we are in a worsening recession.
Notably, the US investment banks that gained the most from the Enron Loophole and from the Gramm Act contributed more than a million dollars to Gramm's campaign.
Currently Gramm is Vice Chairman of UBS, the Swiss Bank that came up with the idea of "death bonds." Worse, though, UBS is involved in a scam where they sold auction rate securities to American customers. Auction rate securities are supposed to be as safe as cash, but the way UBS did it, the fees garnished by their in-house investment bankers were intentionally higher than the return on the securities, ripping off their American customers. The Massachusetts Attorney General has already filed charges against UBS, and private brokers world-wide have dropped UBS stock. UBS is forecasted to lose 82.91% of it's value in 2008. We are talking about the corporate bank where Gramm is Vice Chairman. Looking at his track record there and at the havoc he has wrought on the US economy through the Senate Banking Committee, it's clear that either Gramm is a criminal or grossly incompetent.
Now McCain wants nothing to do with Gramm, wants us to forget Gramm has been a key player on McCain's team. Gramm was McCain's campaign CO-CHAIR and LEADING ECONOMIC ADVISOR. Previously, McCain had said that he planned to appoint Gramm as SECRETARY OF THE TREASURY.
With Gramm as McCain's leading economic advisor, now you know why economists and analysts say that McCain's economic policy plans are untenable.
McCain's Power Outage
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But among the biggest questions about McCain's proposal to lift the moratorium are how soon any new drilling would produce a significant flow of oil, and how much oil is sitting there in the first place. As recently as May 29, at a town hall appearance in Greendale, Wis., McCain noted that lifting the moratorium would be at best a band-aid for the nation's energy problems and that the oil it would provide wouldn't be available anytime soon: "[W]ith those resources, which would take years to develop, you would only postpone or temporarily relieve our dependency on fossil fuels," McCain said. "We are going to have to go to alternative energy."
He certainly has the right to change his opinion on policy options. But the facts are more in line with his earlier statement that drilling would not offer short-term relief for energy prices. The Energy and Information Administration concluded in a 2007 report that:
EIA: The projections in the OCS (Outer Continental Shelf) access case indicate that access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030.
Something that takes 22 years to deliver significant results hardly qualifies as a "short-term" solution.
Why would it take so long? To vastly oversimplify: First, the government has to identify properties to be leased and hold a lease sale. Then, winning bidders need to contract with drilling rigs (all of which are booked for the next five years, according to the New York Times), drill exploratory holes and analyze core samples – "They drilled 75 holes in the North Sea before they figured out the geology" sufficiently to begin drilling productive wells, says Lucian Pugliaresi, president of the oil industry-funded Energy Policy Research Foundation Inc. And then, if oil is found, companies would have to order and put in place production equipment, build pipelines to get the oil to shore, and get various permits and environmental analyses every step of the way.
(Update, June 24: On Monday, June 23, McCain was asked about his offshore drilling proposal at a town hall event in Fresno, Calif. According to MSNBC, he didn't claim that it would bring short-term relief in terms of supply or gas prices. Instead, he said there could be a psychological benefit. Here's his response:
McCain, June 23: "I don't see an immediate relief, but I do see that exploitation of existing reserves that may exist -- and in view of many experts that do exist off our coasts -- is also a way that we need to provide relief. Even though it may take some years, the fact that we are exploiting those reserves would have psychological impact that I think is beneficial.")
Been Down This Road Before
Also in his Tuesday speech, McCain was wrong to imply that regulation was the only thing standing in the way of building more refineries:
McCain: There's so much regulation of the industry that the last American refinery was built when Jerry Ford was president.
McCain is correct that the last oil refinery was built during Ford's presidency; however, he was incorrect to conclude that it is because "there's so much regulation."
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