As President Bush took to the national stage on Thursday to try to salvage his failing second term agenda, a damning new documentary about Enron and close Bush friend was releases to critical acclaim.

The film, Enron: The Smartest Guys in the Room, details the massive behind the scenes fraud the company perpetrated against its employees, its shareholders, and the American public. As reviewer David Edelstein noted, the documentary is at its most enraging when detailing the impact of the Enron-induced rolling blackouts in California.

As I wrote last June in the wake of the CBS News smoking-gun Enron tapes, "the real lesson here is that the radical market deregulation of basic social services is a threat to the public interest and a recipe for economic disaster for American consumers and taxpayers. As George Bush and the free market ideologues of the Republican Party seek to privatize Social Security, Medicare, and personal health coverage, American voters beware."

The full piece, "Enron, Free Markets and Grandma Millie", follows below...

Enron, Markets and Grandma Millie
June 3, 2004

Once is a rare while, conspiracy theorists get it right. In the case of Enron, this occasional conspiracy theorist and ex-Californian hit it right on the head in 2001. As the audiotapes of its traders released by CBS News clearly show, Enron clearly manipulated the newly deregulated California energy market to extract outrageous – and illegal – profits from Golden State ratepayers.

The real scandal of Enron, though, is so much broader than that. It’s not just that Enron conspired to rig the California market in 2000 and 2001. It’s not just that President Bush protected his sugar daddy Ken Lay and other energy barons by refusing to enact price caps or any other ameliorative action to provide relief to Californians. It’s not only that the Bush administration exacerbated the crisis to destroy Democratic Governor Gray Davis, then seen as a possible rival in 2004. And it’s not just that Enron’s frauds robbed American shareholders of literally billions of dollars.

No, the real lesson here is that the radical market deregulation of basic social services is a threat to the public interest and a recipe for economic disaster for American consumers and taxpayers. As George Bush and the free market ideologues of the Republican Party seek to privatize Social Security, Medicare, and personal health coverage, American voters beware.

"F--cking Grandma Millie"

The Enron tapes themselves are a shocking and disgusting display of “the wonder of markets” at work. When it comes to corruption, market manipulation, and the incestuous relationship of Enron and President Bush, the tapes speak for themselves:

Bush to California: Drop Dead

The Enron traders, of course, were exactly right about what candidate George W. Bush would do as president. On May 29th, 2001, now President George W. Bush defiantly declared, “We will not take any action that makes California's problems worse and that's why I oppose price caps.”

To fully appreciate the spring 2001 response by Bush and his Federal Energy Regulatory Commission (FERC), a little history is in order. In 1996, Davis’ Republican predecessor Pete Wilson signed into law energy deregulation passed by the GOP controlled legislature. Under the legislation, California’s state regulated power utilities (such as PSE&G) would sell off their production capacity, and instead purchase energy at the lowest price from competing providers including Enron, Duke, El Paso, and others. Unfortunately, the new laws would force California to buy energy on a short-term “spot” market, rather than lock in long-term contracts at lower rates.

The result (as documented by the Foundation for Taxpayer and Consumer Rights) was the manipulation by Enron and others that led to massive price increases for ratepayers, led to rolling blackouts, decimated the California economy and ruined the state’s finances. By January 2001, the average market price of electricity in California soared to nearly 26 cents per kilowatt-hour — more than 10 times the average rate paid only 10 months earlier. Unable to pass on all of the increases to consumers, California’s utilities faced bankruptcy. Governor Davis moved to arrange a bailout, a step that combined with the tech sector bust ultimately destroyed the state budget and his own reelection.

Davis and Senators Dianne Feinstein and Barbara Boxer practically begged the federal government to impose a ceiling on the wholesale price of electricity since Bush took office. (Both Senators also accused Enron and other providers, rightly as we now know, of illegal market manipulation.) Davis delivered to Bush and congressional GOP leaders a letter signed by 10 leading economists — including James Bushnell, director of research for the University of California Energy Institute — urging the administration to impose rates based on the suppliers' costs of production.

The White House predictably and stridently refused any federal intervention. Bush stated flatly, “For those struggling to pay high energy bills, price caps may sound appealing. But their result will ultimately be more serious shortages and, therefore, even higher prices.”

FERC belatedly ignored the President, voting 2-1 to impose limited price caps. These were ended in October 2002. But by then, the damage was done.

The Aftermath and Lessons Learned

For the milquetoast Gray Davis, the irony of the Enron scandal is particularly bitter. After all, he inherited a flawed deregulation regime from his Republican predecessor and struggled mightily to address the crisis it spawned. Instead, he and his decidedly liberal California electorate (the state voted for Gore by 12% over Bush) were hung out to dry by a vengeful President Bush. He fell victim to Bush’s perverse combination of “free markets in principle, crony capitalism in practice.” The result was his political destruction and the rise of the new “Governator,” Arnold Schwarzenegger.

For us, the lesson is clear. A free citizenry that worships at the altar of deregulation and privatization of basic public services is praying to a false god. American consumers need reliable energy supplies, reasonably and fairly priced, and closely regulated in the name of the public interest and common good. In contrast, the promises of the free market ideologues of the right, whose lexicon contains no terms like “common good” or “public interest”, brought Californians only skyrocketing prices, interrupted service, cynical deception, and unparalleled theft. The “invisible hand” of the market gave us all the finger.

So remember the lesson of Enron when President Bush wants to privatize Medicare and prevent the government from negotiating drug prices directly with the pharmaceutical industry. Remember Enron when Bush advocates “medical savings accounts” and association health plans that enrich insurers, cut taxes for the healthy and wealthy, leave millions of Americans without coverage and higher premiums for the rest. And remember Enron when the GOP pushes for the privatization of Social Security, putting trillions of dollars into the hands of the financial services people who brought you Enron, World Com, Tyco, Adelphia et al in the first place.

If those Bush policies come to pass, it won’t just be Grandma Millie being violated. It will be our ass on the line.

—Perrspective 12:11 PM | Permalink | Comments (1) |