President Obama in water over his head
By Peter Morici
web posted June 21, 2010
With oil still flowing nearly two months after the Deepwater Horizon explosion in the Gulf of Mexico, passions are running high, but reason, not rage, should guide the government response.
Sadly, President Obama, by persistently scolding BP and using inflammatory rhetoric, has done little to improve BP's efforts to cap the well and mitigate the damage, or to foster effective cooperation between federal and state agencies that could improve those efforts.
The Coast Guard, Department of Interior and other federal agencies have limited resources to cap the well. Oil exploration and development is fundamentally a private sector activity, and only companies like BP and their contractors have the essential knowhow and equipment to get that job done.
Suggesting CEO Tony Hayward be fired or demanding the company create a multibillion damage dollar fund, without specifying in detail how it would work, only distracts BP from doing what it has already pledged to do—clean up the mess and leave whole those who have been harmed.
By feeding public distemper, the President risks encouraging boycotts of BP by consumers and bond investors, outsized tort claims and the spectre of excessive punitive awards. Together, those could destroy BP's ability to raise cash and leave small businesses and ordinary citizens without the compensation they are due.
The lawyers might get rich but the victims would be short-changed.
Apparently, BP failed to deploy all the technical precautions available in developing the Deepwater Horizon well, and supervisory pressures on platform engineers and workers caused them to ignore risks that resulted in the explosion. Some within BP may be guilty of criminal negligence.
Quietly, determining what should have been done and wasn't, and prosecuting malefactors, would best serve the public interest. But bankrupting the company will only penalize millions of stockholders—popular villains, perhaps, but in fact often ordinary folk with investments in pension funds and retirement accounts and little culpability in the disaster.
The President's blanket moratorium on new offshore drilling is terrible public policy. One way or another the oil Americans need will be produced—if not in U.S. territory then off the coast of Africa or some other hostile place. The environmental and security risks will only be multiplied by going to even riskier locations.
U.S. consumers will pay more for imported oil and further harm to oceans will be more likely. That simply does not serve the public interest.
Outrage and impulse too often drive public sentiment when tragedy strikes but presidents are elected to look beyond public clamour in a crisis and put the national interest before their own agendas.
The inability of Barack Obama to act and reason with such detachment is a terrible indictment on his presidency.
Peter Morici is a professor at the Smith School of Business, University of Maryland School, and former Chief Economist at the U.S. International Trade Commission.