Browsing the blog archives for October, 2014.

Managing the ebola crisis

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Confidence in the Obama administration’s ability to manage the ebola crisis has been low overall, but it has been driven by hourly news events. Approval ratings for the President and the CDC will almost definitely decline if there are additional cases in the US, and they will rise if there are not. This reflects human nature, but also the public’s inability to focus on the issues at hand and the government’s proper role in managing the crisis.

This is a classic case of crisis management. Every organization should be prepared for a crisis—an unlikely but potentially catastrophic event—but some organizations exist solely for that purpose. Police departments, fire departments and rescue squads are prime examples. The CDC is another. According to the organization’s website:

CDC works 24/7 to protect America from health, safety and security threats, both foreign and in the U.S. Whether diseases start at home or abroad, are chronic or acute, curable or preventable, human error or deliberate attack, CDC fights disease and supports communities and citizens to do the same. CDC increases the health security of our nation. As the nation’s health protection agency, CDC saves lives and protects people from health threats. To accomplish our mission, CDC conducts critical science and provides health information that protects our nation against expensive and dangerous health threats, and responds when these arise.

In simple terms, the CDC receives more than $6 billion each year to prevent medical crises when possible, and minimize their effect when they cannot be prevented. The CDC is responsible for understanding ebola and developing protocols for addressing the potential spread of the disease long before it becomes a daily news story. The fact that its director, Dr. Tom Frieden, has changed his response recommendations on several occasions is evidence that this was not done effectively. The fact that President Obama deemed it necessary to name a “czar” to manage the crisis is further evidence.

It doesn’t matter how many more cases of ebola are diagnosed. Our government was not prepared and has failed us. But many Americans won’t see it this way. They will judge the CDC on the number of additional ebola cases in the US and how many die as a result. If there are not many, the “everything is now under control” narrative will prevail and the details will be forgotten until the next crisis emerges.

I don’t expect perfection from the CDC, but I expect preparation and effective management. New leadership is needed. Too much is at stake.

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Ebola and the CDC

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There has been a lot of talk about the Center for Disease Control’s (CDC) role in the ebola scare. Some of it is accurate, but some is completely misdirected.

First things first…CDC director Dr. Tom Frieden should be fired. The CDC is, by definition, a crisis management organization. His job is to ensure that clear, consistent responses are in place when there is a direct threat to the health of Americans. He has been slow to react, evasive, and inconsistent. But the problem goes much deeper than Frieden.

A recent story in the National Review (www.nationalreview.com/article/390254/cdcs-laughable-pet-projects-brendan-bordelon) shed light on budget realities in the National Institutes of Health (NIH) and the CDC. The NIH’s inflation-adjusted budget more than doubled between 1996 and 2005, but many of its expenditures were less than essential. For example, the NIH spent $1.7 million on a Hollywood liaison to ensure the accuracy of medical portrayals on TV shows, over $5 million for a gay-porn website to provide HIV information, and $1 million on a study of sexual proclivities of fruit flies. The CDC recently spent $110 million on its new headquarters, including $10 million in furniture alone.

Republicans have rushed to criticize the President for proposing cuts in the CDC budget. This is true, but not relevant. The problem is not necessarily the size of the budget, but how it is being allocated. Precisely how much money does the CDC need to fulfill its mission? If a higher CDC budget could prevent the spread of ebola, then more spending on anti-poverty, education, and fill-in-the-blank could have the same positive effects. History has shown us that more government spending is rarely the best way to solve a problem, but Democrats—and in this instance Republicans—continue to tell us otherwise.

Leftists often criticize the private sector and those who claim “government should be run like a business.” In the private sector, it is assumed that failed organizations were not run properly in the first place. They are either directed to change course—new leaders, new strategies, new structures, new ideas—or they go under. They only get additional resources if investors can be convinced that doing so would generate a profit. However, failed government entities like the CDC are often excused because of “tight budgets.” Bang-for-the-buck is rarely discussed. This type of thinking explains the current $18 trillion national debt.

The CDC is relevant and should not be dissolved, but it should—like all other government organizations—be run both effectively (doing the right things) and efficiently (getting the most out of limited resources). It has failed in both regards and the answer begins with new leadership.

If you don’t run government like a business, then how do you run it?

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Venezuela’s oil disaster

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Venezuela’s nationalization of the oil industry has been a disaster. After running off the evil capitalists, the government hasn’t been able to extract and process oil at a competitive rate. The nationalization scheme has also failed to compensate oil companies fairly for their assets. Companies are entitled to fair market compensation if their assets are confiscated, but they rarely get it. Governments typically underpay because they get to set the price. Consider the case of Exxon in Venezuela.

In 2007, Venezuela expropriated Exxon’s Cerro Negro oil venture. Exxon attempted to negotiate a fair settlement with the government, but got nowhere and appealed to arbitration. Two years ago the International Chamber of Commerce ordered Venezuela to pay Exxon an additional $900 million. The World Bank’s International Center for Settlement of Investment Disputes (ICSID) just raised that payment to $1 billion.

This might sound like justice for Exxon, but the $1 billion figure is much less that the company should have received. Exxon was actually seeking $10 billion in additional compensation. While the actual value of the venture can be legitimately debated, most analysts agree that $1 billion is far too low.

This type of government intervention is not only inefficient—Exxon would have done a better job managing the venture—but it violates basic property rights. It is not disputed that Exxon has a right to fair compensation for its assets. However, Exxon should not have been required to sell the venture in the first place.

But socialist governments like Venezuela don’t respect private property. They take what they want and pay what they determine is fair. It’s an immoral system. If I tried this with my neighbor’s big screen TV I’d be in jail.

Venezuela’s bully government has run off oil producers, retailers, airlines, and a host of other foreign companies. The private sector is vanishing, leaving production to the bureaucrats. It’s no wonder that the Venezuelan economy is in shambles.

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