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Archive for April, 2010

UPDATE: Make that 240,000 gallons a day.  The spill is five times as bad as initially estimated.  As of Wednesday, it covered an area larger than Ohio and was expected to reach the Louisiana coast by Friday.  All attempts to release the “automatic” blowout valve, which was supposed to prevent just such a spill, have failed.  Dispersant is being sprayed on portions of the slick so that the oil will more easily mix with the water, thus to sink to the ocean floor.  Booms are being placed around some of the slick to gather the oil into smaller (about 300 gallon) patches to be burned.  Obviously, they need to stop adding to the problem, so Plan B is to place a dome over the broken pipe, but all the wreckage from the platform will make that difficult.  So Plan C is to bring a new platform to the area and drill a relief well.  Unfortunately, that will take several months.  Meanwhile, oil continues to pour into the Gulf of Mexico.  President Obama, are you still supporting increased offshore exploration?  Gov. Charlie Crist has flip-flopped again, back to his original skepticism about the risks to sensitive ecological areas.  Californians who remember the spill off Santa Barbara don’t need to be convinced.

UPDATE:  Preliminary investigation of the cause of the initial gas leak that led to the explosion that destroyed the platform indicates a problem with the cementing process.  The mile-long underwater pipe is supposed to have a double wall with the space between the walls filled with cement.  Indications are that the cement was either not in place at all or that there had been problems with the filling process.  The corporation responsible for the cementing process?  Halliburton.  Meanwhile, President Obama has put a halt to the renewal of off-shore drilling, and some Senators are saying that any energy bill that includes off-shore drilling will be “dead on arrival.”  Clearly we need energy, but at what cost?  There are costs well beyond the financial ones — environmental, national security, etc. — that must be considered.  Perhaps a carbon tax isn’t so bad after all.

UPDATE (Friday mid-day): And now there are reports of a second Gulf coast rig that has capsized…

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That’s how much crude is spilling into the Gulf of Mexico daily from that drilling platform that exploded and sank last week.  Eleven workers are still missing.  Nearly 1000 barrels a day…  and at this point weather is preventing a full-scale clean up effort.  An attempt to send a robotic sub to repair the leak has failed, and the spill is larger than the state of Rhode Island (Monday) West Virginia (Tuesday) — as it approaches the Gulf Coast with its sensitive ecological areas.  Estimates are that it will take up to two weeks three months to stop the spill.  Not to clean it up.  Just to cap the wellhead.  If that turns out to be true, the total volume of oil spilled would approach half the size of the Exxon Valdez spill in Prince William Sound.

Oil Slick from sunken platform as seen from space

Not surprisingly, the oil companies have been hard at work urging Congress to relax safety requirements while publicly touting how safe new drilling techniques are.  And if that sounds familiar, it’s the same thing that the coal industry has been doing.  Remember Massey Energy’s safety record, both before and since the explosion at the Upper Big Branch Mine?  Remember how the coal industry has been touting “clean coal?”  We’re learning that there had been safety problems on that off-shore rig leading up to the catastrophic explosion.  Eleven more deaths.

In our unquenchable thirst for petroleum, is this the price we pay?  Is this a price we are willing to continue paying?  Petroleum is used not only to power our vehicles, but also to process our food, create fertilizers and pesticides, and create marvelous building materials.  Burning it in our vehicles is a terrible waste of a perfectly good resource.  We get nearly 2/3 of our petroleum from overseas, including from the Middle East.

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The Senate is holding a vote this afternoon to BEGIN debate on financial reform.  And once again the Republicans are planning to filibuster.  They don’t even want debate to begin.  A new Washington Post/ABC poll finds that two thirds of Americans favor stricter control (read regulation) of the financial sector.  Mitch McConnell may have inadvertently told the truth today when he said, “A vote for cloture is a vote saying we’re done listening to the American people.”  Of course, a vote against cloture guarantees that they’re done.

Rather than using them as an extraordinary measure, GOP filibusters have become the standard in this Congress.  This time they don’t even want to let the bill come up for debate, where they would be able to offer amendments.  Meanwhile, they’re trying to convince people that they support reform.  Yeah, right.  And while they’re mouthing fake support for reform, they’re fighting just as hard to keep their meetings with the Wall Street Bankers and their lobbyists secret and taking every chance possible to suck as much campaign money from them as possible.  They are clearly siding with the Wall Street status quo, supporting the very abuses that led the country and the global economy to the brink of disaster.

The Roosevelt Institute’s Mike Konczal lists six “must have” things for financial reform.

  1. Too big to fail: Senators Brown, Kaufman, Casey and Whitehouse have proposed the Safe Banking Act of 2010, in which banks would be required to limit liabilities to 3% of GDP.
  2. Hard leverage cap:  That same bill would cap debt-to-equity ratios at 16.76:1.  In other words, an institution’s debt cannot exceed $16.76 for every dollar of equity. For comparison, Lehman’s debt ratio exceeded 30:1 when it collapsed.
  3. Banks pay for their own clean-up:  In other words, no more taxpayer-funded bailouts.  The Democrats want the cost of liquidating a failed bank to be funded through a fee, paid by the banks and paid in advance.  That’s essentially what the FDIC has, and except in the case of massive bank failures, the FDIC has enough money in it to cover those costs.  The GOP prefers the banks to pay into the fund only in the event that failure actually occurs.  Nevertheless, they’re trying to convince voters that the Dodd bill would “institutionalize” taxpayer bailouts.
  4. Derivatives:  The Senate Agriculture Committee (don’t ask who regulating derivatives falls in the lap of the Agriculture Committee!) has voted out a bill that would regulate derivatives — those esoteric financial bets that were instrumental in blowing up the financial system in 2008.
  5. Off-balance sheet assets:  Otherwise known as Enron-style accounting.  Unfortunately, it’s not clear that this is included in any of the current proposals.
  6. The Volker Rule:  This would prevent banks from owning, investing in or sponsoring hedge funds or private equity funds.  The Dodd bill suggests another government study while Senators Merkley and Levin have sponsored an amendment that would require implementation of the Volker Rule.

The Democrats have promised to strengthen the Dodd bill.  Of course, that process can’t happen if the GOP goes through with its pledge to prevent the bill from coming to the floor for debate.  Here’s a graphic showing each of the six elements, what each does and its status in the various House and Senate bills.

The complete Roosevelt Institute’s report can be found here.   What about the consumer financial protection aspects of reform?  Should that exist as part of the bill at all?  And if so, should it be housed in the Fed, the agency that oversees the banking system?  Or should it be independent so that it can truly focus on protecting consumers?  That isn’t even included in Konczal’s six vital elements.  I’ll be watching as the Senate acts, or doesn’t.  Will you?  And it will be interesting to see just long the Republicans can maintain their support of Wall Street in the face of such wide-spread public support of reform.  Running in 2010 on supporting Wall Street doesn’t sound like a winning strategy.

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Now that the governor has signed this anti-immigration bill into law, will someone please tell me just how law enforcement is going to avoid being accused of racial profiling.  It is true that most of the immigrants who are in Arizona illegally come from Mexico or points south.  Yet, there are illegal/undocumented immigrants who hail from Europe, from Asia, and from Canada as well.  So, to fulfill the law without profiling would require AZ police to require documents from anyone they stop.  And that doesn’t address the likelihood that people of Hispanic origin who were born in the U.S., and therefore are citizens being arrested for not carrying proof of citizenship.

Mike Huckabee is correct.  The enactment of this law will lead to a “bonanza of lawsuits.”  Those suits will cost the state of Arizona millions of scarce dollars, and ultimately the law is bound to be declared unconstitutional.

Yes, we need to tackle immigration reform.  How about starting by arresting the executives and managers of corporations that knowingly hire workers who lack proper identification or who, when the Social Security check comes back “no match” simply advise the worker to get different identification?  That would eliminate many of the workers in our meat packing industry, as well as kitchen help in restaurants, housekeepers in hotels, not to mention the people who toil in our produce fields.  I realize that we’re in a recession, but experience tells us that these jobs go unfilled when employers rely solely on US workers.

The call to round up and deport all illegal/undocumented workers is simply impractical.  We need some method to deal with our borders, and even more importantly to ensure that we have workers to do the work that needs to be done.  I could get on a soap box about things we need to do to “fix” our industrial food system, because that system is intimately entwined with our immigration situation.  But that is for another post.

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Twenty-five miners lost.  Hope fading for a successful rescue of another four who remain trapped because of high levels of methane gas in the mine.  The worst US mining tragedy in several decades.  A mine operator with a long history of safety violations, averaging at least one per day.  We don’t yet know the cause of the deadly explosion, but we do know that methane gas is abundant in that particular mine and that high methane levels are hampering rescue efforts.  And we do know that ventilation problems were fairly frequent.  Mine safety experts say that explosions are avoidable occurrences when safety standards are followed.  And we also know that Massey Energy’s Upper Big Branch Mine was a non-union operation.

Unions have been under increasing pressure for several decades — decades that have been characterized by stagnant wages and reduced benefits for workers.  I don’t think those two facts are isolated coincidences.  If unions are unable to revitalize to protect workers and bargain successfully for better working conditions, are there other options?  What size fines would be necessary for mine operators to take safety seriously?  Would $1 million per life do it?  Or would it take $10 million? Or perhaps an even higher fine, with lower rates for injury.  We know that there have been 12 miners killed at Massey mines over the past several years and that 3 coal miners die daily on average due to black lung disease.

Mining is one of the most dangerous jobs there is.  And there is a long and shameful history in this country of considering miners as expendable commodities to be used up and then discarded.  We all know about the company towns, where the mine operator also controlled the housing and commerce needed to provide food and shelter for the miners.  Too often those company-controlled towns operated in ways that made sure that miners were always in debt to the mine operator, and thus unable to seek safer and more profitable employment.  Despite all that, miners and their families are a proud lot.  They stick together when tragedy strikes.  They all know how easily it could have been themselves suffering, rather than their neighbor.

Is our desire for cheap energy at any cost related to this disaster?  Coal is the cheapest fuel available for our power plants.  Yet coal and methane gas are among the worst of the greenhouse gases.  This could be a teachable moment.  Or have we become so jaded to the plight of our fellow Americans that we turn away once again and give in to our desire for cheap energy, regardless of the long-term and other human costs?

I’ve been thinking a lot about this conundrum.  What if safety was made more profitable than fines?  Too often the fines are more symbolic — in effect a slap on the wrist.  The decision-makers need to have a stake in making mining safer.  My thinking went along the lines of a fine structure that impacted those very decision-makers.  Here’s an idea, expressed as an equation.

Fine = (salary a/number a) + (salary b/number b) + (salary c/number c)… + salary n/number n)

where a = CEO, b = other executives, c = top level non-executive management, etc.  This approach would give each level of management and executives a personal stake in that the fines would come directly from their salaries.  And it would place an increasingly higher penalty on those with more decision-making responsibility.  As it is, the incentive is geared toward higher production levels.  The higher the production rate, the more the company can absorb the fines.  But higher injury and fatality rates tend to be directly related to increases in production.

It is a known fact that non-union mines have a higher rate of safety violations that do unionized mines.  And Massey has worked very hard to ensure that their mines are non-union.

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Ok, we’ve gotten the first round of health care done — and over time people will see that there are no death panels, that those who continue to choose to go without coverage won’t be arrested or audited by the IRS, that their doctors will actually be able to treat them without having to go three rounds with the insurance bureaucrats.  Kudos to Wellpoint for raising premiums for individuals up to 39% in California (Anthem Blue Cross) and at double digit rates in 10 other states.  Combine that with the 51% raise in compensation they’ve just given their CEO, and the public option just might be granted a second chance.  It’s hard to justify that sort of raise under any circumstances.  In case you hadn’t heard, the new annual compensation is $13 million or so.  Just think how many uninsured people or pre-existing conditions could be covered for that!

But there are other important issues that need attention — jobs and financial reform for openers.  It’s interesting that the tea party activists share those concerns with most of the rest of us.  Will it be enough to allow cooler heads to prevail and some actual cooperation?  That remains to be seen.

Statistics and history show us that in time of severe economic downturns, government does indeed play an important role in being the employer of last resort.  And most of the current crop of unemployed Americans would much rather work than collect unemployment — especially when those checks can be held hostage to members of Congress trying to score political points.  Jobs mean that people are paying income taxes, and that helps reduce the red ink in Washington.  And jobs give people money to spend on both necessities and hopefully even some discretionary spending.  Finally, lower unemployment rates will go a long way to dispel some of the anger that is running high in certain quarters.

Last month’s jobs numbers represent the most jobs created anytime in the past three years.  Sure, some of those jobs are temporary census workers, but during the time they are employed, census workers will be earning money that can and will be funneled into the economy.  162,000 jobs isn’t much, but it’s a far cry better than the 750,000 jobs lost per month at the end of 2008 and beginning of 2009.  More importantly, the trend is definitely in the right direction.  And best of all, most of those 162,000 jobs were in the private sector.  We shouldn’t be surprised if the unemployment rate actually increases in the next month or two.  People who had given up seeking jobs will likely get back into search mode, causing an uptick.  It’s very understandable, but those who want to grasp at anything in order to criticize the administration will surely trumpet that uptick as another “Armageddon,” just as false as the death panel claims.

I won’t be satisfied with the unemployment numbers until every person who wants to work can find a meaningful job at a living wage.  That’s unlikely to happen any time soon, but a long time frame doesn’t detract from its value as a goal.

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Surveys indicate that a significant portion of Americans believe in the Biblical account of the “end times.”  And a significant portion of those believe that the Rapture will occur in their lifetime.  Yet, most of those same people are also worried about the deficit and the debt that President Obama and the Democratic Party in Congress are leaving to their children and grand-children.  Does anyone else see a contradiction in those two positions?

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