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National Guard soldiers secured sandbags Tuesday near Grand Isle, La. An oil slick was predicted to make landfall in the area.
When Interior Secretary Ken Salazar said Tuesday that he would insulate safety and environmental enforcement from the revenue-raising side of the agency that regulates offshore drilling in the United States, he was following in the footsteps of several other countries with extensive drilling operations.
But as the nation continues to deal with the consequences from last month’s explosion of the Deepwater Horizon drilling platform in the Gulf of Mexico, some critics say the United States should create a stricter separation of the roles, the kind of action taken by nations like Australia, Norway and Britain, which also get a great deal of government revenue from oil and gas drilling.
“Not to be too glib, but absent more fundamental change, this amounts to little more than rearranging the deck chairs on the Deepwater Horizon,” said Jeff Ruch, the executive director of Public Employees for Environmental Responsibility, a nonprofit alliance of scientists and law enforcement officials based in Washington.
Mr. Salazar said the separation of the two roles would address conflicts “both real and perceived” at the federal Minerals Management Service, whose core mission includes maximizing the amount of money that the government gets from leases and royalties on oil, gas and other mineral extraction.
But both functions will remain part of the agency and the Interior Department. Australia, by contrast, created a separate safety agency, the National Offshore Petroleum Safety Authority, in 2005 to more clearly avoid conflicts. Norway established its Petroleum Safety Authority a year earlier for similar reasons.
Britain severed enforcement and revenue functions after a 1988 oil rig explosion in the North Sea, known as the Piper Alpha incident, that killed 167 people. After an investigation, the government moved responsibility for safety oversight from the Department of Energy to the Health and Safety Executive, the independent watchdog agency for work-related health, safety and illness.
“You need that autonomy, and you need that ability to regulate independently,” said David Doig, the chief executive of Britain’s Offshore Petroleum Industry Training Organization, a nonprofit, industry-owned training and certification body that tries to standardize safety and skills training across the offshore industry.
“It doesn’t have to be contentious,” Mr. Doig said. “But it has to be respected, and regulators have to have the power — and the incentive — to say, ‘We’ll just shut you down.’ ”
Robert Weissman, president of Public Citizen, a consumer watchdog organization in Washington, noted that the Minerals Management Service had a long history of close relationships with the oil industry, documented by both internal and Congressional investigators.
“The failure of M.M.S. is legendary in a government that is replete with regulatory conflicts of interest,” Mr. Weissman said. “A lot of these agencies have comparable tendencies — particularly when they have a dual mission, or when they adopt a dual mission, and begin to identify with the industry they’re regulating.”
Mr. Weissman and Mr. Ruch pointed to other federal agencies where conflicts are inherent, including the National Forest Service, which has both development and protection responsibilities over public lands, and the National Oceanic and Atmospheric Administration, which some environmental groups have argued should be lifted out of the Department of Commerce, where it now sits, and made part of a separate oceans agency.
Moving safety and environmental responsibilities wholly out of the Minerals Management Service and the Department of Interior would require an act of legislation or a restructuring by the president.
No matter how the new division of responsibility is ultimately structured, Mr. Ruch and other regulatory watchdogs say that much will depend on how the office is staffed and how much the culture of coziness with the industry is discouraged.
“Imagine five years from now if there’s an offshore safety agency and they are causing a well-connected company angst, and that company calls their contacts in Congress and in the White House — that agency will definitely get blowback,” Mr. Ruch said. “The question is whether they’ll be situated well enough to withstand it.”
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Economic Scene: In Greece, a Reflection of U.S. Debt Problems
Posted on 12. May, 2010 by NYT > Politics.
It’s easy to look at the protesters and the politicians in Greece — and at the other European countries with huge debts — and wonder why they don’t get it. They have been enjoying more generous government benefits than they can afford. No mass rally and no bailout fund will change that. Only benefit cuts or tax increases can.
Shoppers in Athens. In Greece and the United States, citizens expect the government to provide social services like Medicare.
Yet in the back of your mind comes a nagging question: how different, really, is the United States?
The numbers on our federal debt are becoming frighteningly familiar. The debt is projected to equal 140 percent of gross domestic product within two decades. Add in the budget troubles of state governments, and the true shortfall grows even larger. Greece’s debt, by comparison, equals about 115 percent of its G.D.P. today.
The United States will probably not face the same kind of crisis as Greece, for all sorts of reasons. But the basic problem is the same. Both countries have a bigger government than they’re paying for. And politicians, spendthrift as some may be, are not the main source of the problem.
We, the people, are.
We have not figured out the kind of government we want. We’re in favor of Medicare, Social Security, good schools, wide highways, a strong military — and low taxes. Dealing with this disconnect will be the central economic issue of the next decade, in Europe, Japan and this country.
Many people, including some who claim to be outraged by the deficit, still haven’t acknowledged the disconnect. Just last weekend, Tea Party members helped deny Senator Robert Bennett, the Utah Republican, his party’s nomination for his re-election campaign, in part because he had co-sponsored a health reform plan with a Democratic senator. Economists generally think the plan would have done more to reduce Medicare spending than the bill that passed. So, whatever its intentions, the Tea Party effectively punished Mr. Bennett for not being a big enough fan of big government.
Or consider the different fates of two parts of President Obama’s agenda. Mr. Obama has unrealistically said that taxes do not need to rise on households making less than $250,000, and this position has come to be seen as an ironclad vow. He has also called for billions of dollars in sensible cuts to agribusiness subsidies, tax loopholes and the like. The news media and Congress have largely ignored these proposals.
The message seems clear: woe unto the politician — in Washington, Athens or London — who tries to go beyond platitudes and show some actual fiscal restraint.
This situation obviously can’t continue, as Robert Greenstein, perhaps the leading liberal budget expert, points out. Mr. Greenstein’s politics make him sympathetic to the worry that all the deficit talk will become an excuse to pull back on stimulus spending while unemployment remains high or to gut social programs. But he also knows the numbers well enough to understand that our Greece moment, whether it takes the form of a crisis or not, is coming.
“Most of the public thinks, ‘If only the darn politicians could get their act together to cut waste, fraud and abuse, and to make tax avoidance go away and so on,’ ” Mr. Greenstein, head of the Center on Budget and Policy Priorities, says. “But the bottom line is, there really is no avoiding the hard choices.”
For Greece and possibly other European countries, change will come from the outside. The countries lending the money for the Greek bailout — chiefly Germany — are demanding big cuts to the welfare state. Greek citizens will soon have a harder time retiring in their 40s.
Here in the United States, we’re likely to have the chance to solve our problems before our lenders demand it. Those lenders continue see the American economy as a safe haven, thanks to our history of strong economic growth and political flexibility.
It is even possible that future growth will make the current deficit projections look too pessimistic. That sometimes happens when the economy is weak. In the wake of the early 1990s recession, for example, almost no one imagined that the budget would show a surplus by the end of the decade.
But the main issue isn’t the near-term deficit — the one created by the recession, the wars in Iraq and Afghanistan, the Bush tax cuts and the Obama stimulus. The main issue is the long-term deficit.
As societies become richer, citizens tend to want better schools, better medical care and other government services. This country is following that pattern, but without paying the necessary taxes. That combination has us on a course to Greece-like debt.
As a rough estimate, the government will need to find spending cuts and tax increases equal to 7 to 10 percent of G.D.P. The longer we wait, the bigger the cuts will need to be (because of the accumulating interest costs).
Seven percent of G.D.P. is about $1 trillion today. In concrete terms, Medicare’s entire budget is about $450 billion. The combined budgets of the Education, Energy, Homeland Security, Justice, Labor, State, Transportation and Veterans Affairs Departments are less than $600 billion.
This is why fixing the budget through spending cuts alone, as Congressional Republicans say they favor, would be so hard. Representative Paul Ryan of Wisconsin has a plan for doing so, and it includes big cuts to Social Security and the end of Medicare for anyone now under 55 years old. Other Republicans have generally refused to endorse the Ryan plan. Until that changes or until the party becomes open to new taxes, its deficit strategy will remain unclear.
Democrats have more of a strategy — raising taxes on the rich and using health reform to reduce the growth of Medicare spending — but it is not nearly sufficient.
What would be? A plan that included a little bit of everything, and then some: say, raising the retirement age; reducing the huge deductions for mortgage interest and health insurance; closing corporate tax loopholes; cutting pensions of some public workers, as Republican governors favor; scrapping wasteful military and space projects; doing more to hold down Medicare spending growth.
Much of this may be unpleasant. But by no means will it doom us to reduced living standards or even slow economic growth. We can still afford to spend more on Medicare — even more per person — than we do today, and more on education, the military and other areas, too. We just can’t afford the unrealistic promises that the government has made. We need to make choices.
“It’s not a matter of whether we have the resources to solve our problems,” as Alan Krueger, the chief economist at the Treasury Department, says. “It’s a matter of political will.”
For now at least, our elected officials are hardly the only ones who lack that will.
E-mail: leonhardt@nytimes.com
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Mary L. Schapiro, chairwoman of the Securities and Exchange Commission, during a House hearing Tuesday on Capitol Hill.
WASHINGTON — Regulators examining the causes of the brief stock market free fall last Thursday are looking closely at heavy selling in the market for stock-index futures by a single trader, beginning 10 minutes before stock prices began to plummet.
Gary Gensler, the chairman of the Commodity Futures Trading Commission, said at a Congressional hearing on Tuesday that during that crucial time period, the futures trader, whom he would not identify, accounted for about 9 percent of trading volume in the most actively traded stock-index derivative contract, known as the 500 e-mini futures contract.
All of the trader’s orders were to sell, Mr. Gensler said, while most of the other 250 traders who were active in the same market that day were both buying and selling securities.
As the trader’s orders went through, the futures index on the Chicago Mercantile Exchange began to plummet.
The identity of the trader remained unclear. Terrence A. Duffy, executive chairman of the CME Group, which operates the Chicago exchange, said on Tuesday: “We obviously won’t divulge that market information. We are in contact with the folks that did the trade. There is no question that it is a bona fide hedger” and not someone intending to disrupt the markets.
Moments after the trade, individual shares traded on markets around the country started to drop sharply, and regulators are looking at whether the trade in the futures market could have been a catalyst for the spiral.
Mr. Gensler emphasized that regulators were continuing to search for the causes of the brief panic and were likely to find other trades that could also have contributed to the plunge.
In singling out the trade in the Standard & Poor’s e-mini futures contract, however, regulators are suggesting they view that trading activity as critical to understanding the sequence of events that erased more than 600 points from the Dow Jones industrial average in minutes on May 6.
As stock markets began to decline, regulators say they believe, other factors came into play that accelerated the fall, including the absence of circuit breakers on several electronic exchanges even as the New York Stock Exchange’s own circuit breakers kicked in.
Three rival exchanges stopped routing trades to the exchange’s electronic market after they perceived technical problems there. Market experts say they believe this prompted high-frequency computer traders, who account for a vast swath of trading, to withdraw from the market.
Mr. Gensler and Mary L. Schapiro, the chairwoman of the Securities and Exchange Commission, both emphasized on Tuesday that their agencies’ investigations had not yet settled on a single cause of Thursday’s volatile trading and that numerous factors could have contributed. Their comments were in testimony prepared for the House Capital Markets Subcommittee.
“Ultimately, we may learn that the extraordinary disruption in trading, however it may have been triggered, was the result of a confluence of events,” Ms. Schapiro said, “which, taken together, exacerbated what already had been a down day and led to an extraordinarily steep price drop and recovery. However, we are not prepared at this time to draw that conclusion.”
Mr. Gensler’s comments about the potential cause were the most pointed of any regulator in the five days since the markets suffered what Ms. Schapiro called a “profoundly disappointing and troubling” break in the stock market’s stability and integrity.
For now, both regulators said that they had largely ruled out several other potential causes that had been widely discussed since Thursday, including erroneous or so-called fat finger trades, unusual trading in Procter & Gamble stock, and hacker or terrorist activity.
The regulators’ testimony provided the first official timeline of the events that preceded the mini-crash.
At the time the futures trader entered the market at 2:32 p.m. Eastern time on Thursday, stock prices had already fallen significantly. The Dow Jones industrial average was down by about 1.5 percent by 2 p.m., Ms. Schapiro said, and Mr. Gensler noted that in the next 24 minutes, several closed-end mutual funds, which trade on stock exchanges in a manner similar to stocks, fell by 50 percent or more.
Shortly after the futures trader began entering sell orders at 2:32, “the market decline began to steepen,” Ms. Schapiro said. By 2:42, the Dow was down 3.9 percent. Then, the bottom fell out, with the Dow diving nearly 5.5 percent in the next five minutes, before rebounding by about 5 percent in the next minute and a half.
“Our preliminary analysis shows that this precipitous decline in stocks, and the subsequent recovery, followed very closely the drop and recovery in the value of the e-mini S.& P. 500 future, which tracks the normal relationship between futures and stock prices for the broader market,” Ms. Schapiro said.
Edward Wyatt reported from Washington and Graham Bowley from New York.
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Senator Arlen Specter started running this advertisement on Tuesday. It will be shown in Pennsylvania.
The latest on President Obama, his administration and other news from Washington and around the nation. Join the discussion.
THE SCRIPT In the main section of the ad, President Obama says: “Now, I want to say a few things about Arlen Specter. He came to fight for the working men and women of Pennsylvania. And Arlen Specter cast the deciding vote in favor of a Recovery Act that has helped pull us back from the brink. Because you know he’s going to fight for you regardless of what the politics are.”
ON THE SCREEN At the beginning of the spot, Mr. Specter is seen greeting Mr. Obama on a stage. For most of the rest of the spot, the president is seen speaking, with intermittent shots of Mr. Specter at his side.
ACCURACY A case can certainly be made that Mr. Specter was a decisive vote for the stimulus package. In February 2009, the Senate gave final approval to the measure by a vote of 60 to 38, with Mr. Specter one of three Republicans to vote for it. (The others were Susan Collins and Olympia J. Snowe of Maine.)
SCORECARD Representative Joe Sestak has maintained that Mr. Specter is not a true Democrat and switched parties merely to save his seat in the Senate. The spot employs the country’s top Democrat — Mr. Obama — to rebut that first argument and to validate Mr. Specter’s credentials as a Democrat. The advertisement also highlights the senator’s support of the stimulus bill, which remains very popular among Democratic primary voters.
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Representative Joe Sestak started running this advertisement last week.
The latest on President Obama, his administration and other news from Washington and around the nation. Join the discussion.
THE SCRIPT The spot twice shows Mr. Specter saying, with eyebrows arched, “My change in party will enable me to be re-elected.” It also includes former President George W. Bush stating that “Arlen Specter is the right man for the United States Senate. I can count on this man. See, that’s important. He’s a firm ally.” It ends with an announcer saying: “Arlen Specter switched parties to save one job. His. Not yours.”
ON THE SCREEN At one point in the spot, Mr. Specter is seen arm in arm with Mr. Bush. Later on, Mr. Specter is shown on a stage with both Mr. Bush and former Senator Rick Santorum, a Pennsylvania Republican who is a darling of conservatives. And near the end of the advertisement, Mr. Specter is pictured with former Gov. Sarah Palin of Alaska.
ACCURACY When he became a Democrat, in April 2009, Mr. Specter openly said he did not think he could win re-election as a Republican. But he also argued that the Republican Party was increasingly inhospitable to moderates like himself. Mr. Bush and Mr. Santorum did endorse Mr. Specter in 2004, when he narrowly fought off a challenge from Pat Toomey in the Republican primary.
SCORECARD This advertisement is far from subtle, linking Mr. Specter with three Republicans (Mr. Bush, Mr. Santorum and Ms. Palin) who are deeply unpopular among Pennsylvania Democrats. Still, the advertisement uses Mr. Specter’s own words — as well as Mr. Bush’s — to make the political case against him, appealing to Democratic concern about the senator’s ideological bona fides and his political integrity.
