A pliable Congress makes sure that our government has no business sense. After years of treating the Strategic Petroleum Reserve as a sacred trust and vital strategic buffer against oil shortages, Congress has decided it's really something different: a piggy bank. The recently enacted budget deal ordered the sale of 58 million barrels of its oil as a way to offset some spending increases. Separate House and Senate highway funding bills would sell even more. And there's even consideration of selling oil to fund medical research.
The sales won't begin until 2018, but the outlook is not good. Oil has spent most of the last year below $50 a barrel, substantially less than the $74 the government paid on an inflation-adjusted basis over the years.
So far as I know, buy high, sell low is not taught in business schools. It doesn't make money, pay the bills, impress people or bring in new business. When it happens as the result of being in desperate financial straits it is unfortunate. When it happens by choice it is incomprehensibly stupid.
But there you have it. This is hardly the first time government made a fool of itself. In fact bad business deals seem to be something of a calling card for Uncle Sam.
Beginning in 2009, he lost $9 billion bailing out General Motors and Chrysler while some private lenders were made whole. The deal violated the central rule of corporate bankruptcy, which is that the financier of last resort (which in this case was the U.S. Treasury) gets paid back first.
More recently, Uncle Sam's Federal Communications Commission has embarked on a plan to assist TV stations in selling some of their valuable spectrum to cellphone companies. The plan would make all the sense in the world but for one slight detail: The spectrum in question belongs not to the TV stations but to Uncle Sam. This deal violates a central rule of common sense, which is that you shouldn't let people take your stuff and sell it.
The most infuriating example of Uncle Sam's woeful business acumen is the way he buys prescription drugs – that's because this is not a one-time blunder but an ongoing boondoggle. Thanks to a 2003 law, he is barred from bargaining with drug companies as he hands them $80 billion to $90 billion a year on medicines for Medicare patients. This violates pretty much every rule there is of shrewd business and good government.
In all of these cases, Uncle Sam was at a distinct disadvantage. The industries he was dealing with could run to Congress to get the better of him.
Long before the FCC was ready to auction the spectrum, for example, the broadcasters had sold Congress on the notion that decades of using the publicly owned spectrum for free made it theirs. Similarly, when Congress passed the Medicare drug law in 2003, it was happy to parrot the drug industry's rather unusual argument — that spending less by driving a hard bargain with taxpayer dollars constitutes Big Government.
Now comes the deal to sell oil. It may be the smallest, but its elemental arithmetic makes its folly so obvious.
Created in 1975, the Strategic Petroleum Reserve — a series of four enormous underground storage reservoirs pumped full of oil — was once thought of as monumentally important to American interests. Though token amounts have been drawn down from time to time, the reserve has remained largely full, even when oil topped $100.
Now that oil is beginning what looks like a long-term bear market, Uncle Sam has decided it's time to sell. Go figure. He sat on it for four decades, and now he can't wait until prices rebound for selling.
Needless to say there are better ways of raising money. According to the Congressional Budget Office, $121 billion could be saved over 10 years simply by allowing Medicare to bargain over drug prices. The broadcasters' spectrum is worth a fortune. And, of course, vast sums could be had by restraining the growth of entitlements, closing
infuriating tax loophole, or simply raising taxes.
But Congress won't allow any of that to happen. So count on Uncle Sam to make a lot of dubious deals — including selling more oil any time it wants to increase spending or make budgetary ends meet.
Dan Carney is a writer for USA TODAY's Editorial Page.