Jerry Ford’s America: The Chicken Has Lost Its Head

True fear comes to a patient when he realizes his doctor’s a quack. For the country laid out on the operating table, there was a sudden realization last week, amidst the outpouring of reports from Washington, that the leaders of the country had lost all sense of reality. The truth came home in a number of different ways.

• There was Dr. Arthur Burns, seemingly the most collected and powerful member of the govern­ment, insisting that a default by New York City would not injure the international economic system. Even as he pronounced these views, international bankers were talking of withdrawing funds from New York banks and were saying that a default by New York would have “a major negative impact on international financial markets.”

• More profoundly there was the sight of the appointed Presi­dent of the United States uncomfortably trying to explain a botched in-house coup in which his chief of staff had seized the De­partment of Defense to boost his own political career and in which the chief of the CIA had been fired in favor of a political hack from Texas. It became clear to all that Ford is a continuation of Water­gate by similar means; that the country is run by a bungling junta exclusively preoccupied with the supposed threat presented by a retired actor and his wild-eyed horde streaming toward Washing­ton from the Western provinces.

• In Congress, presumed center of democratic supervision, the mood was one of listless hysteria. “Everyone here thinks the whole thing is coming to an end,” said one Senate aide to us last week as he hurried in to yet another meet­ing about antitrust.

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As a matter of rational analysis there is no doubting the serious­ness of the situation. Nobody likes to shout “Fire” in a crowded theatre, but it is obvious that even a two-day delay in welfare checks could mean a frontal assault on supermarket windows; beyond that, the possible shut-off of electricity and gas, the closing of 51 schools and hospitals, and the wind-down of other vital services may well follow from a default.

At the moment the headline story in ongoing crisis is the situation of the New York banks. Because of the complex and secret internal operations of banking, much of this talk is pure speculation. But by the end of last week there were clear signs that the big New York banks were under some measure of strain, signified by the fact that they were having to pay more money for certificates of deposit lodged with them by large corporations in and outside the country. Until a few weeks ago a Chicago bank would have had to have paid a higher interest rate than a New York one. By the weekend the situation was re­versed. There were other signs that individual investors may have been shifting funds from the banks to Treasury securities. Yields on Treasury securities were going down, reflecting a heightened desire to buy them.

Various banking analysts and trade periodicals have begin to discuss the names of specific banks which they believe to be under acute pressure. Most com­monly mentioned are Chemical Bank, long a focus of discussion because of poor management; the Chase Manhattan, because of the sickness of its $900 million real estate investment trust; and Bankers Trust, which has sunk millions in foreign investments. There was even talk that Bankers Trust was looking for a merger. All these banks own city and state paper — and the imminence of de­fault throws into harsher relief their long-term problems.

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There is certainly no agreement on what would happen if any of the banks were on the edge of failure. Burns has made it clear that the Federal Reserve will bail them out. But such a process is not as simple as it sounds, for if a tremor ran through the banking industry straining several banks at once Burns would be hard put to pour enough money into them to plug the dikes without removing significant sums from other sectors of the economy and there­by risking a deeply damaging structural blow at the “recov­ery.”

In Congress legislation to avert default became dimmer than ever, with the unions holding out against the possibility of federal revision of their contracts and pensions in a post-default situation. Revisions of bankruptcy laws allowing New York to be considered a supplicant before the courts underwent some reverses in Congress, but according to some congressmen, looked as though they would struggle through.

This is rational talk. More dominant was the simple, irrational statement expressed by almost all involved that no one knows what is going to happen.

New York’s problems are pre­sented against the backdrop of an alleged “recovery” in the national economy. But there are doubts about this, too, and whether the recovery is already over.

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Despite the much-touted but now concluded “upturn,” unemploy­ment remains high and in some instances is increasing. In New York, for example, the October rate was 11.9 per cent — up from 7.3 per cent last year. In Boston the rate is 12.9 per cent, up from 6.9 per cent last year. In Detroit, where the auto industry is alleged­ly enjoying a modest upturn, the rate is 13.6 per cent.

World trade in basic commodi­ties does not appear to be improving. We have previously reported the deep slump in iron ore, which has led to reduction of 40 per cent or more of iron ore imports by European steelmakers. Only last week news came that U.S. steel producers were cutting back their production along with investment programs for future expansion. Pessimism about the future of the economy is the reason for the steelmakers’ timorous prudence.

The world shipping industry is in severe decline. Oil demand, as we have noted before, is down. Such facts should not be construed as mere statistical embroidery. For the last year everyone has known that world copper trade was in severe decline and that efforts to curtail production by producing countries had failed. The end re­sult hair been that Zaire, one of the major copper producers in the world, has defaulted on loans from major New York banks. This de­fault led to frantic demands for special bail-out legislation by Congress, in which millions would be lent to Zaire in an effort to avert domino third world defaults.

We have already mentioned the situation of the big U.S. banks. Many of the economic thunder clouds could be dispelled if people would only increase their spend­ing. There is little sign of this. Worse still, there is real resistance to purchasing high-priced cars and appliances, and simple lack of financing to buy a house. The construction industry remains in a deep slump.

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In a rational world, as the capi­talist system has shown over time, there could indeed be a recovery and a reorganization of the economy by 1977. World trade could take a turn for the good and U.S. trade profit by the strength of the dollar.

But it is plain that the country is not under rational control. Its leaders are unable to focus on reality and prefer to drift along on a broad river of illusions:

• There is the illusion, fundamental to the situation of New York City, that things will right themselves if only the canons of private enterprise are applied.

• There is the illusion that the Federal Reserve is indeed a central bank and can control the monetary system. But the Federal Reserve is not the central bank of Western Europe and Japan and cannot control economic activities there.

• There is the illusion that the country can survive high structur­al unemployment without enormous social strains. There is the concomitant illusion proposed by advocates of “the capital shortage.” They say U.S. industry needs capital presently being devoted to social spending. They call for a simple redistribution of wealth toward business. Their illusion is that the country could comfortably survive such a reallocation without enormous turmoil.

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Running behind these contradic­tions is a long-term and destruc­tive self-deception: that the United States is controlled ultimately by a pluralistic democracy, replete with checks and balances; that all will be well if those “crooked politicians” are chased out. The events of the last few months have made it clearer than ever that the U.S. is dominated by large corporate institutions and run from day to day by a junta which makes any banana republic seem a model of stability and restraint. One way that these illusions can be maintained is to have a strongly run country: in the case of the United States a strong president who leaves freedom for illu­sion beneath the umbrella of authority. This crucial pact was shattered with the assassination of John Kennedy, the central trauma of the postwar era. In the wake of the trauma came dislocation: the disaster of the Vietnam War; the other assassinations; the ruin of democratic procedures at the Chicago convention in 1968; ultimately the discrediting and collapse of Nixon; his spiritual survival in mangled form with the Ford junta.

People yearn for a reknitting of old pacts, for some sense of con­tinuity in authority. This is what explains a fact incomprehensible to some: the popularity of Hubert Humphrey as a Democratic can­didate. Humphrey links us to the New Deal, to institutional contin­uity. It also explains why the Newsweek cover of Richard Nixon was among its better selling issues.

If this is so, the real question is not whether there should be a strong president — or a dictator. Things may have slid beyond the point where a dictator could spring successfully to the levers of power. By failing to govern, by lying badly and by acting the fool, Ford has finally shattered the pact. What he is nominally leading is a people whose illusions are broken, whose structure of society is eroded and who face panic. It is this situation which renders almost impossible the seemingly simple rational acts required to repair — if only for a time — the political and economic order.


Blackout 1977: Conned Again

God Gets a Bum Rap

Despite Con Ed’s claims in the wake of the blackout that only an “act of God” breached the elaborate sys­tem of defenses it had mounted fol­lowing the great failure of 1965, in fact, a crucial link in its supply system broke down in September of last year. And, astoundingly, Con Ed had no intention of repairing it until May of 1978, 10 months from now.

Officials at both the Public Service Commission and at Public Service Electric & Gas Co. — the big New Jersey utility that exchanges Elec­tricity with Con Ed — have admitted that, had this line been in operation, large amounts of electricity could have flowed into New York during the height of the crisis.

In his press conference last week, Charles Luce, chairman of Con Ed, made no mention of this line, nor indeed have other company officials. Maps issued by the company appear to depict the bro­ken-down line as if it were in operating condition.

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The line in question is a 345-kilovolt (kv) stretch of cable running from the Hudson terminal of the Public Service Electric & Gas Co. across the bottom of Manhattan to the Farragut station of Con Ed in Brooklyn. At this point electricity generated in New Jersey could have been switched in massive quantities back to central Manhattan, across Brooklyn, up through Queens, and indeed could have surged powerfully through the entire Con Ed system.

The transmission cable was taken out of service on September 4, 1976, because of a failure in a phase-angle regulator, which modulates the flow of elec­tricity. Con Ed, apparently, had no standby equip­ment and did not repair the regulator because it saw no pressing need for the line. A spokesman for the New York Public Service Commission, the state regulatory agency that oversees Con Ed’s operations, pointed out that Con Ed was selling less electricity than anticipated and hence, did not push forward with the repairs.

The broken-down 345-kv line seems to have been a lynchpin of Con Ed’s system. Modern electric supply networks depend on a system for exchanging power with other utilities in a series of regional grids. In the case of Con Ed, power is, of course, to a major extent, generated by the company itself. But it is also extremely dependent on interchanges with other power grids that can feed it electricity in times of need. Thus, Con Ed can look to the Northeast, where the New England power pool can help out. And it can turn to the north, for assistance from the New York power pool.

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But, perhaps most important, it can turn south to the so-called PJM interchange for a potentially huge surplus of electricity. This is a pool made up of the states of Pennsylvania, New Jersey, Maryland, Delaware, Virginia, and Washington, D.C. In the past it has been difficult for private utility systems, such as Con Ed, to hook into the mass power blocs — the huge TVA system, the western public cooperatives, etc. — that are available in other parts of the United States. Big public systems have a hard time meshing into the private utility networks because the latter have not had transmission lines big enough to carry the electricity. It is rather like a turnpike suddenly meeting a bridle path, with a corresponding paralysis at the meeting point.

One of the results of the 1965 blackout was a consensus by state and federal government and the private utilities to see what could be done to boost capacity and better coordinate interchanges among the regional power pools and their member utilities. It should be pointed out that subsequent reforms were largely voluntary efforts undertaken by the companies. While the Federal Power Commission, which under the law regulates interstate whole­sale shipment of power, could set standards for interconnections and power pools, it has preferred to work on a voluntary basis with the private companies. It encouraged them to form advisory committees, which have laid out general plans for improvement and which the FPC endorses as a virtual national policy.

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All in the Family

Over the past 10 years these reforms and guidelines have been bundled together and put out as a National Power Survey. But the informal, ad hoc nature of the proceedings, left largely in the hands of private industry, has made it impossible to tell how effective the post-1965 operation has been.

Last week’s blackout starkly exposed the apparent nonchalance of the Federal Power Commission, the state Public Ser­vice Commission, and Con Ed itself in devising a truly crisis-proof system.

Consider the Con Ed system. In essence, the company operates a transmission loop. Power from New England and the New York power pool can surge down through Millwood in Westchester, where it is joined by power produced by Con Ed’s Indian Point plant. In addition, two lines — one 500-kv and the other 345-kv — can send electricity out of the PJM pool into a substation at Ramapo on the New York­–New Jersey border, and hence to the Con Ed main line at Buchanan. This, then, is the main highway for electricity, whether purchased from outside or produced by Con Ed, and it pours straight down into the main Con Ed service area that culminates in the huge New York market.

Obviously, this is only part of the system since a cutoff of supply would leave the city helpless. So there is a bottom to the loop, consisting of two transmission lines. One of these is a 230-kv cable that attaches the PJM system to New York via Linden­-Goethals (Staten Island) Brooklyn and then into the rest of the system. The second point at which the loop is closed is the previously mentioned 345-kv line between New Jersey and Brooklyn.

What happened last week was that the “act of God” — lightning — effectively closed the northern corridor. Since the 345-kv had been broken down and unre­paired since September 1976 — and since the company’s generating facilities could not be brought on stream fast enough — the pressure to supply the loop fell largely on the Linden-Goethals line. In effect, this cable became the lifeline to the PJM pool. For a time, the Long Island Lighting Company was also able to put electricity into the city through Jamaica. But the Lilco system was no match for the occasion, especially since it is interconnected to power in the Northeast through a relatively small cable under Long Island Sound.

Consequently, Lilco shut down supplies to New York at 9:25 p.m., and, four minutes later, the phase-angle regulator at Con Ed’s end of the Linden-Goethals link broke. Almost at once “Big Allis” at Ravenswood shut itself down to avoid burning out under the load.

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If Only…

According to officials at the Public Ser­vice Electric & Gas Co., there was a possibility that, had the 345-kv line been in service to help out the hard-pressed 230-kv cable, things might have gone differently. Mr. Wei Shing Ku, transmission-planning engineer with the New Jersey utility, told us, “If we had had the two ties in service and if they did not trip during the power surge, it is possible you could have alleviated the blackout.”

The question for the various investiga­tions now under way is why the Federal Power Commission did not insist on an adequate interchange system.

The same question can be more severely posed to the Public Service Commission, which appears to have behaved in a lethargic manner. And, finally, shopowners and the citizenry of New York City will no doubt be questioning this faulty interchange sys­tem in litigation against Con Ed. Indeed, Con Ed ratepayers might legitimately ask why this line, paid for with their money, has been allowed to be out of commission for so long. They may very well also ask whether their money, which went to con­struct the Astoria 6 and Indian Point 3 power plants (taken over by the Power Authority of the State of New York) might not have better been spent on a really strong interchange system to guard against catastrophe and other acts of God.

As for Con Ed: It is too easy, in the manner of much press comment, to dismiss the utility as a hapless victim of a cabal of incompetent engineers. The fact is that, since the 1965 blackout, this company has time and again vigorously opposed efforts within the federal government to establish a national network of regional power grids to cope with supply and de­mand in an efficient way.

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Set Against Reform 

In the mid-1960s, when interchange, or “reliability” legislation was before Congress, staff aides working on the bill recall that Con Ed opposed it on grounds that it would impede the company from doing what was needed. This same legislation, fortuitously, is emerging this week from the house commerce committee. Con Ed officials cheerfully told us on Monday that the bill “wouldn’t affect us,” because Con Ed was “solidly interconnected.” The spokesman went on to declare the company was opposed to the legislation because, as he put it, reliability was tied to rates, and in that case, the state regulatory commis­sions do the most “efficient” job. In a roundabout way he was echoing what all private utilities have said since the early part of this century. They do not want federal intervention in their areas where they have worked out comfortable relationships with state bodies.

What Is Needed Now

It is almost a waste of time to investigate the rusted, archaic structure of Con Ed with a view to ever putting it in reasonable running order. The basic problem is to reduce the consumption of electricity and at the same time, wherever possible, move toward the introduction of alternative en­ergy sources. These alternatives — and here we are thinking mainly of solar, small-­scale hydro, and wind — should be taken up through a decentralized scheme, imple­mented in the City of New York neighborhood by neighborhood. It is hard to believe, no matter how much goodwill the officials of Con Ed might have, that they can run a profit-oriented company based on reduced sales. And reduced sales is precisely what is needed.

We are not talking about reducing the supply of electricity to poor people or small businessmen or, indeed, to middle-class residential users. We are talking rather about cutting back consumption by the huge office buildings, which are the real gluttons of electricity in this city.

The best thing for New York would be for the city council to initiate a study on the feasibility of taking over Con Ed. As events in San Francisco have shown, it is not necessary to purchase all parts of the system outright. Those features of the Con Ed apparatus that are of use to the citizen­ry can be leased for some period of time.

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A new public organization needs to be set up to design and implement an energy system for the city. This would involve phased introduction of solar and wind energy. As the City of Hartford now illustrates, it is quite possible to create munici­pal organizations that put unemployed peo­ple to work in the construction, installation, and maintenance of all sorts of solar plants, and in the introduction of insulation.

Overall, New York should increasingly be looking toward an energy system that employs a strengthened electrical-inter­change grid to back up alternative means of energy production. There will always be people — even in the midst of a blackout — ­who declare such proposals to be rankly utopian. Even as they despise the future (which is, for anyone looking around the U.S., not so far distant) they should contemplate what the current policy portends: increased means of electrical production, both within the Con Ed area of operation and within the region as a whole. Such means will include nuclear power and reintroduction of coal-fired electricity gen­eration, with attendant pollution. It also will undoubtedly result in the development of offshore oil and gas, with concomitant processing industries onshore.

Filth at sea will be married to filth on land. Where maps from the National Insti­tutes of Health now show eruption of cancers of all sorts in the refining and chemical industrial areas of New Jersey, similar charts for the last quarter of the century will surely reflect the spread of this disease from New Jersey’s cancer alley all around New York and the North­east.

The blackout revealed the city to be at a crossroads in energy policy and at a politi­cally apt time.

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Let the Candidates Speak

Every mayoral candidate should be compelled to set forth a coherent energy program for the future of the city. Energy has far greater importance than many of the issues on which candidates have been quick to take positions. A reasonable cam­paign plank should begin with a program of public takeover of Con Ed and include a detailed plan for introducing alternate en­ergy. Such an energy policy should contain a general outline of what the candidate sees as the future industrial base of the city. The provision of such an energy policy would be a speedy way of assessing just how pro­gressive each candidate is in areas of vital concern to the city’s future.