Friday, April 08, 2011

Why Koch Industries Wants A Government Shutdown

It’s looking like the U.S. government will shut down Saturday. If the shutdown lasts more than a few weeks, it could cost President Obama votes. How so? Because it could cut 1% off of 2011’s economic growth rate and if that slower growth continues into 2012 – especially when coupled with the $20 a barrel spike in the price of oil, that should cut another 1% off of economic growth -- Obama’s previously forecast 2012 popular majority could shrink.

Why is the government about to shut down? That’s easy, the Tea Party wants it to. Behind the Tea Party is Koch Industries, a $100 billion privately held refining, chemicals, plastics and textiles company, that has contributed at least $45 million to the Tea Party through various Political Action Committees. What Koch wants is an end to environmental regulation and that’s what it may take to pass a budget to get the U.S. government back.

I am not sure that Koch Industries cares about all the other stuff – wiping out funding for Planned Parenthood and so on. But I doubt that it could get enough political support for its End-the-EPA agenda without tying it into issues needed to attract voters who care about so-called social issues like abortion. It’s all part of Koch Chairman Charles Koch’s philosophy of Market Based Management (MBM): “creating real, sustainable value for customers, communities and Koch companies.”

The government shutdown is likely to create more losers than winners, as I posted Thursday. But according to the New York Times, if the government shutdown lasts for several weeks, it could cause a significant slow-down in economic growth during the quarter -- resulting in a 1 percentage point decline in GDP growth rate on a 14.2% drop in Federal spending, assuming that this year's possible shutdown lasts the same three weeks that 2005's did. With 2011 GDP growth previously predicted to be 3%, according to the IMF, the shutdown could slice it to 2%. If you consider that the $20 per barrel rise in oil prices since the beginning of the year would slice another 1% from GDP growth, we could be looking at 1% GDP growth in 2011.

Tea Party's Agenda: Right To Pollute Wrapped in an Anti-Abortion Taco Shell

The looming government shutdown is happening not because of the deficit -- the two sides are just a few billion apart on their budget reduction targets -- but on social issues. The social issues -- like defunding Planned Parenthood, impeding the implementation of health care reform, stopping an effort to end the for-profit education industry's abusive practices -- are the Tea Party bait needed to get its political support for the one issue that really concerns Koch -- unshackling itself from the Environmental Protection Agency (EPA).

Fortune reports that the pollution-boosting goals of those blocking a resolution of the budget showdown include the following:
  • Impeding the EPA from regulating greenhouse gas emissions;
  • Stopping the Interior Department from imposing new restrictions on surface mining near streams;
  • Defunding a public database tracking injury reports in children's products; and
  • Zeroing out funding for an EPA push to limit mercury emitted in cement production.
How does this fit with Koch's MBM philosophy? A big part of MBM is applying Koch's capabilities to new industries. According to an interview with Charles Koch, this led Koch to buy wood pulp fluff mills from Georgia-Pacific and eventually the entire company for $21 billion in 2005. In the same interview, Koch mentioned that he believes government intervention impedes U.S. competitiveness by creating new problems that require even more intervention.

This fits well with Koch's desire to gut the EPA. After all, Georgia-Pacific wants to dump waste from one of its Florida plants into Florida's Saint John's River. And according to the Florida Independent, "Georgia-Pacific has long come under fire as one of the St. Johns River’s top point-source polluters." Moreover, it reports that Koch has not been able to build a pipeline to pollute that river even more with Dioxin -- the genetic-mutation-causing chemical in Agent Orange -- due to its war of words with the EPA.

To me, it seems a bit selfish that Koch should be able to shut down the operations of the entire U.S. government just so it's free to pollute our environment. But thanks to the January 2011 U.S. Supreme Court's Citizens United ruling, there's nothing to stop Koch from spending as much as he wants on the company's cause.

And that strikes me as a questionable way to create "real, sustainable value."


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