For a long time, firms that produced in the United States, by virtue of our geographic isolation, had a competitive advantage when trying to get American consumers to purchase products. But by the 1960’s and 70’s, these advantages had been vastly reduced as transportation costs were diminished. So what did Congress and the President do? They tried protecting a series of industries, each of which had regional constituencies.

The example of this that is the most notable, and that I will discuss here is the American car industry, although a number of others fit just as well. I could talk about the food industry, I could discuss the steel industry, and the list goes on and on. But the auto industry provides an example of the confluence between constituent interests, Congressional power, and industry power. For at least 40 years, since Nixon, presidents have called for the nation to conserve energy. For at least 20 years, Congress has tried to induce the American car industry to become more efficient in its work rules, to make smaller, more gas efficient cars, to compete with foreign producers whose products appeal to younger consumers. But as long as there were enough WW II veterans buying huge, unwieldy cars, the car industry resisted change. This resistance took on the visage of John Dingell (D-MI), who for much of the modern era has been House Energy and Commerce Committee Chair. Coincidentally Dingell is married to Debbie, who was a GM lobbyist when they wed, and is currently a GM executive. Because this industry was protected, it was unable or unwilling to adapt itself when gas prices began to skyrocket.

Now, in the wake of the Gulf oil spill, once again we see a confluence of Gulf senators and representatives, industry lobbyists, and other political actors calling for an end to the deep sea drilling moratorium even though we know we don’t have the technology to stop massive leaks like the one that has been going on for the last few months. They use the same reasoning that was used by the car industry to resist changing the behavior. In this case, a law was passed maximizing liability at $75 million when mishaps occur. Who then should pay when damages are in the tens of billions of dollars? Should the government (namely, me and you)? Should we tax all of the oil companies (that is, me and you bear the increase)? Or should BP be penalized? In this case, if BP tries to recoup its costs, its profits should still be reduced, unless the other oil companies raise prices at the same time by the same amount.

Today on Meet the Press, both Senator Landieu and Governor Barbour said that without deep sea drilling, tens of thousands of jobs in their states will be lost. Michigan made the same argument about car workers for 20 years. How’s that working out? I’ve got an idea…if these reserves are so essential to the companies, why don’t they fund research to make them safe to extract? If these reserves are so essential to the Gulf States, why don’t the states fund research to make them safe to extract? The problem is that there are no incentives to find long-term remedies as long as the states and the firms are protected from paying any long-term costs. So these costs will be shifted to the rest of the nation.