By Stephen Kaufman
Washington — The Obama administration welcomed the World Trade Organization’s (WTO’s) June 30 ruling against “launch aid” and other subsidies paid to the Airbus aircraft company from European countries, saying those subsidies are inconsistent with WTO rules and have harmed the U.S. aircraft industry.
In a June 30 statement, Commerce Secretary Gary Locke said the ruling acknowledges that “distortive government subsidies should have no place in the global marketplace.”
The decision, coming after four decades of European subsidies for Airbus, “marks a victory” for small- and medium-sized American companies who produce components for jetliners produced by the Boeing aircraft corporation, he said.
“No industry supports more U.S. jobs through exporting than American aerospace manufacturing,” Locke said, adding that the Commerce Department and the office of U.S. Trade Representative (USTR) Ron Kirk are aggressively trying to sell American products and services around the world to “help us reach President Obama’s goal of doubling exports in five years and supporting 2 million new jobs.”
According to the report released by the WTO panel, more than $20 billion in low-interest government loans to Airbus has been used to develop six models of passenger jets. The WTO ruled that the loans were prohibited export subsidies.
USTR General Counsel Tim Reif explained June 30 that in order to launch a new model of large commercial aircraft, aircraft producers must invest billions of dollars before the first aircraft is delivered or any revenue is received.
To cover some or all of its launch development costs, Airbus received loans from many European governments and the European Union (EU), which then was to be repaid through aircraft sales royalties, Reif said. However, the loan balance was forgiven even if Airbus did not sell enough aircraft, he added.
The WTO panel “found that the launch aid for each and every model of Airbus aircraft was provided free of market interest rate, and therefore constituted a subsidy,” Reif said. “The panel also found that the launch aid and other subsidies that the United States challenged caused adverse effects to the interests of the United States, and therefore are inconsistent with WTO rules.”
The approximately $15 billion in launch aid and $5 billion in other subsidies to Airbus “caused massive adverse effects to the U.S. industry,” Reif said, pointing to the WTO report’s documentation of Boeing’s loss in market share to Airbus in Europe, Australia, China and other countries.
Reif also said the WTO panel concluded that certain launch aid provided for the A380 superjumbo, which made its first commercial flight in October 2007, was “prohibited outright under WTO rules, without the need for showing adverse effect.”
The panel’s ruling confirms that “launch aid and other subsidies significantly distorted the launch decisions that Airbus made, and found that, but for these subsidies, none of the Airbus aircraft models would have been launched when they were and certainly not with the same features,” Reif said.
The United States initiated the WTO case in October 2004 and a panel chaired by Uruguay’s former ambassador to the WTO, Carlos Perez del Castillo, was formed to examine the matter in May 2005. The EU has filed its own WTO complaint that the U.S. government is subsidizing Boeing and a decision is expected in August, according to press reports.
Reif said the United States is seeking the immediate adoption of the panel’s report, and would then see if the European Union decides to appeal the decision.
U.S. Trade Representative Kirk “has made clear that he is prepared to sit down or have his staff sit down with European Commission representatives at any point to work on the problems raised by the panel report,” Reif said.
Airbus developed a new A350 airplane after the WTO dispute was filed in 2004, and Reif said U.S. officials hope that “the clarity of this ruling and its scope is something the EU will take to heart and the member states as they proceed forward” with existing and future Airbus programs.
“It would be very disappointing at this point in time if any of the member states proceeded ahead with disbursing launch aid to the A350,” Reif said.
(This is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://www.america.gov)
http://usinfo.americancorner.org.tw/st/eur-english/2010/July/20100707145015esnamfuak0.4017908.html
Monday, July 19, 2010
Unlikely Tutor Giving Military Afghan Advice by Elisabeth Bumiller
WASHINGTON — In the frantic last hours of Gen. Stanley A. McChrystal’s command in Afghanistan, when the world wondered what was racing through the general’s mind, he reached out to an unlikely corner of his life: the author of the book “Three Cups of Tea,” Greg Mortenson.
“Will move through this and if I’m not involved in the years ahead, will take tremendous comfort in knowing people like you are helping Afghans build a future,” General McChrystal wrote to Mr. Mortenson in an e-mail message, as he traveled from Kabul to Washington. The note landed in Mr. Mortenson’s inbox shortly after 1 a.m. Eastern time on June 23. Nine hours later, the general walked into the Oval Office to be fired by President Obama.
The e-mail message was in response to a note of support from Mr. Mortenson. It reflected his broad and deepening relationship with the United States military, whose leaders have increasingly turned to Mr. Mortenson, once a shaggy mountaineer, to help translate the theory of counterinsurgency into tribal realities on the ground.
In the past year, Mr. Mortenson and his Central Asia Institute, responsible for the construction of more than 130 schools in Afghanistan and Pakistan, mostly for girls, have set up some three dozen meetings between General McChrystal or his senior staff members and village elders across Afghanistan.
The collaboration, which grew in part out of the popularity of “Three Cups of Tea” among military wives who told their husbands to read it, extends to the office of Adm. Mike Mullen, the chairman of the Joint Chiefs of Staff. Last summer, Admiral Mullen attended the opening of one of Mr. Mortenson’s schools in Pushghar, a remote village in Afghanistan’s Hindu Kush mountains.
Mr. Mortenson — who for a time lived out of his car in Berkeley, Calif. — has also spoken at dozens of military bases, seen his book go on required reading lists for senior American military commanders and had lunch with Gen. David H. Petraeus, General McChrystal’s replacement. On Friday he was in Tampa to meet with Adm. Eric T. Olson, the officer in charge of the United States Special Operations Command.
Mr. Mortenson, 52, thinks there is no military solution in Afghanistan — he says the education of girls is the real long-term fix — so he has been startled by the Defense Department’s embrace.
“I never, ever expected it,” Mr. Mortenson, a former Army medic, said in a telephone interview last week from Florida, where he had paused between military briefings, book talks for a sequel, “Stones into Schools,” and fund-raising appearances for his institute.
Mr. Mortenson, who said he had accepted no money from the military and had no contractual relationship with the Defense Department, was initially critical of the armed forces in the days after the Sept. 11, 2001, attacks as “laptop warriors” who appeared, he said, indifferent to the civilian casualties inflicted by the American bombardment of Afghanistan.
In its early days “Three Cups of Tea,” the story of Mr. Mortenson’s efforts to build schools in Pakistan, was largely ignored by the military, and for that matter by most everyone else. Written with a journalist, David Oliver Relin, and published in hardcover by Viking in March 2006, the book had only modest sales. Most major newspapers, including this one, did not review it.
But the book’s message of the importance of girls’ education caught on when women’s book clubs, church groups and high schools began snapping up the less expensive paperback published in January 2007.
Sales to date are at four million copies in 41 countries, and the book’s yarn is well known: disoriented after a 1993 failed attempt on Pakistan’s K2, the second-highest mountain in the world, Mr. Mortenson took a wrong turn into the village of Korphe, was nursed back to health by the villagers and, in gratitude, vowed to build them a school.
He returned to Pakistan a year later with a $12,000 donation from a Silicon Valley benefactor and spent most of it on school construction materials in the city of Rawalpindi — only to be told he could not get his cargo to Korphe without first building a bridge.
The story of that bridge, Mr. Mortenson’s relationships with Pakistanis, and the schools that followed appealed so much to one military spouse that in the fall of 2007 she sent the book to her husband, Christopher D. Kolenda, at that time a lieutenant colonel commanding 700 American soldiers on the Pakistan border.
Colonel Kolenda knew well the instructions about building relationships with elders that were in the Army and Marine Corps’ new counterinsurgency manual, which had been released in late 2006. But “Three Cups of Tea” brought the lessons to life.
“It was practical, and it told real stories of real people,” said Colonel Kolenda, now a top adviser at the Kabul headquarters for the International Security Assistance Force, in an interview at the Pentagon last week.
Colonel Kolenda was among the first in the military to reach out to Mr. Mortenson, and by June 2008 the Central Asia Institute had built a school near Colonel Kolenda’s base. By the summer of 2009, Mr. Mortenson was in meetings in Kabul with Colonel Kolenda, village elders and at times President Obama’s new commander, General McChrystal. (By then at least two more military wives — Deborah Mullen and Holly Petraeus — had told their husbands to read “Three Cups of Tea.”)
As Colonel Kolenda tells it, Mr. Mortenson and his Afghan partner on the ground, Wakil Karimi, were the American high command’s primary conduits for reaching out to elders outside the “Kabul bubble.”
As Mr. Mortenson tells it, the Afghan elders were often blunt with General McChrystal, as in a meeting last October when one of them said that he had traveled all the way from his province because he needed weapons, not conversation.
“He said, ‘Are you going to give them to me or am I going to sit here and listen to you talk?’ ” Mr. Mortenson recalled. The high command replied, Mr. Mortenson said, that they were making an assessment of what he needed. “And he said, ‘Well, you’ve already been here eight years, ” Mr. Mortenson recalled.
Despite the rough edges, Colonel Kolenda said the meetings helped the American high command settle on central parts of its strategy — the imperative to avoid civilian casualties, in particular, which the elders consistently and angrily denounced during the sessions — and also smoothed relations between the elders and commanders.
For Mr. Mortenson’s part, his growing relationship with the military convinced him that it had learned the importance of understanding Afghan culture and of developing ties with elders across the country, and was willing to admit past mistakes.
At the end of this month, Mr. Mortenson, who lives in Bozeman, Mont., with his wife, Tara Bishop, and two children, is going back for the rest of the summer to Afghanistan, where to maintain credibility he now has to make it clear to Afghans and a number of aid organizations that he has no formal connection to the American military.
Mr. Mortenson acknowledges that his solution in Afghanistan, girls’ education, will take a generation and more. “But Al Qaeda and the Taliban are looking at it long range over generations,” he said. “And we’re looking at it in terms of annual fiscal cycles and presidential elections.”
http://www.nytimes.com/2010/07/18/world/asia/18tea.html?_r=1&ref=elisabeth_bumiller&pagewanted=print
“Will move through this and if I’m not involved in the years ahead, will take tremendous comfort in knowing people like you are helping Afghans build a future,” General McChrystal wrote to Mr. Mortenson in an e-mail message, as he traveled from Kabul to Washington. The note landed in Mr. Mortenson’s inbox shortly after 1 a.m. Eastern time on June 23. Nine hours later, the general walked into the Oval Office to be fired by President Obama.
The e-mail message was in response to a note of support from Mr. Mortenson. It reflected his broad and deepening relationship with the United States military, whose leaders have increasingly turned to Mr. Mortenson, once a shaggy mountaineer, to help translate the theory of counterinsurgency into tribal realities on the ground.
In the past year, Mr. Mortenson and his Central Asia Institute, responsible for the construction of more than 130 schools in Afghanistan and Pakistan, mostly for girls, have set up some three dozen meetings between General McChrystal or his senior staff members and village elders across Afghanistan.
The collaboration, which grew in part out of the popularity of “Three Cups of Tea” among military wives who told their husbands to read it, extends to the office of Adm. Mike Mullen, the chairman of the Joint Chiefs of Staff. Last summer, Admiral Mullen attended the opening of one of Mr. Mortenson’s schools in Pushghar, a remote village in Afghanistan’s Hindu Kush mountains.
Mr. Mortenson — who for a time lived out of his car in Berkeley, Calif. — has also spoken at dozens of military bases, seen his book go on required reading lists for senior American military commanders and had lunch with Gen. David H. Petraeus, General McChrystal’s replacement. On Friday he was in Tampa to meet with Adm. Eric T. Olson, the officer in charge of the United States Special Operations Command.
Mr. Mortenson, 52, thinks there is no military solution in Afghanistan — he says the education of girls is the real long-term fix — so he has been startled by the Defense Department’s embrace.
“I never, ever expected it,” Mr. Mortenson, a former Army medic, said in a telephone interview last week from Florida, where he had paused between military briefings, book talks for a sequel, “Stones into Schools,” and fund-raising appearances for his institute.
Mr. Mortenson, who said he had accepted no money from the military and had no contractual relationship with the Defense Department, was initially critical of the armed forces in the days after the Sept. 11, 2001, attacks as “laptop warriors” who appeared, he said, indifferent to the civilian casualties inflicted by the American bombardment of Afghanistan.
In its early days “Three Cups of Tea,” the story of Mr. Mortenson’s efforts to build schools in Pakistan, was largely ignored by the military, and for that matter by most everyone else. Written with a journalist, David Oliver Relin, and published in hardcover by Viking in March 2006, the book had only modest sales. Most major newspapers, including this one, did not review it.
But the book’s message of the importance of girls’ education caught on when women’s book clubs, church groups and high schools began snapping up the less expensive paperback published in January 2007.
Sales to date are at four million copies in 41 countries, and the book’s yarn is well known: disoriented after a 1993 failed attempt on Pakistan’s K2, the second-highest mountain in the world, Mr. Mortenson took a wrong turn into the village of Korphe, was nursed back to health by the villagers and, in gratitude, vowed to build them a school.
He returned to Pakistan a year later with a $12,000 donation from a Silicon Valley benefactor and spent most of it on school construction materials in the city of Rawalpindi — only to be told he could not get his cargo to Korphe without first building a bridge.
The story of that bridge, Mr. Mortenson’s relationships with Pakistanis, and the schools that followed appealed so much to one military spouse that in the fall of 2007 she sent the book to her husband, Christopher D. Kolenda, at that time a lieutenant colonel commanding 700 American soldiers on the Pakistan border.
Colonel Kolenda knew well the instructions about building relationships with elders that were in the Army and Marine Corps’ new counterinsurgency manual, which had been released in late 2006. But “Three Cups of Tea” brought the lessons to life.
“It was practical, and it told real stories of real people,” said Colonel Kolenda, now a top adviser at the Kabul headquarters for the International Security Assistance Force, in an interview at the Pentagon last week.
Colonel Kolenda was among the first in the military to reach out to Mr. Mortenson, and by June 2008 the Central Asia Institute had built a school near Colonel Kolenda’s base. By the summer of 2009, Mr. Mortenson was in meetings in Kabul with Colonel Kolenda, village elders and at times President Obama’s new commander, General McChrystal. (By then at least two more military wives — Deborah Mullen and Holly Petraeus — had told their husbands to read “Three Cups of Tea.”)
As Colonel Kolenda tells it, Mr. Mortenson and his Afghan partner on the ground, Wakil Karimi, were the American high command’s primary conduits for reaching out to elders outside the “Kabul bubble.”
As Mr. Mortenson tells it, the Afghan elders were often blunt with General McChrystal, as in a meeting last October when one of them said that he had traveled all the way from his province because he needed weapons, not conversation.
“He said, ‘Are you going to give them to me or am I going to sit here and listen to you talk?’ ” Mr. Mortenson recalled. The high command replied, Mr. Mortenson said, that they were making an assessment of what he needed. “And he said, ‘Well, you’ve already been here eight years, ” Mr. Mortenson recalled.
Despite the rough edges, Colonel Kolenda said the meetings helped the American high command settle on central parts of its strategy — the imperative to avoid civilian casualties, in particular, which the elders consistently and angrily denounced during the sessions — and also smoothed relations between the elders and commanders.
For Mr. Mortenson’s part, his growing relationship with the military convinced him that it had learned the importance of understanding Afghan culture and of developing ties with elders across the country, and was willing to admit past mistakes.
At the end of this month, Mr. Mortenson, who lives in Bozeman, Mont., with his wife, Tara Bishop, and two children, is going back for the rest of the summer to Afghanistan, where to maintain credibility he now has to make it clear to Afghans and a number of aid organizations that he has no formal connection to the American military.
Mr. Mortenson acknowledges that his solution in Afghanistan, girls’ education, will take a generation and more. “But Al Qaeda and the Taliban are looking at it long range over generations,” he said. “And we’re looking at it in terms of annual fiscal cycles and presidential elections.”
http://www.nytimes.com/2010/07/18/world/asia/18tea.html?_r=1&ref=elisabeth_bumiller&pagewanted=print
Saturday, July 17, 2010
For BP, Rising Pressure in Oil Well Seen as a Positive Sign
By HENRY FOUNTAIN
As the Gulf of Mexico entered a third day free of fresh oil from BP’s blown-out well, a company official said Saturday that there were still no signs of damage in the 13,000-foot-deep hole.
“We’re very encouraged at this point,” said Kent Wells, a senior vice president of BP. He said that a test to assess the condition of the well was continuing, and that any decision to end it would be made by Thad W. Allen, the retired Coast Guard admiral who commands the spill response.
“The longer the test goes, the more confidence we have in it,” Mr. Wells said. “But we don’t want to jump ahead of the process we’ve laid out. Admiral Allen is the ultimate decision maker.”
The test that began on Thursday afternoon with the closing of valves on a new, tighter-sealing cap atop the well had exceeded 48 hours. Officials had said that would likely be the upper time limit for the test, though they had said the procedure could be extended.
With the valves closed, oil stopped gushing into the gulf for the first time since the disaster began with the explosion of the Deepwater Horizon drilling rig on April 20.
The test will help determine whether the well can remain shut off or whether it must be reopened and containment systems restarted.
Two vessels that had been collecting oil through pipes at the well head are on standby, Mr. Wells said, and a third, the Discoverer Enterprise, could be brought in quickly with a device to funnel oil from the top of the cap.
With three containment systems working, Mr. Wells said, “We could very well be collecting all the flow at that point.” The flow rate is estimated at 35,000 to 60,000 barrels of oil per day.
But in reopening the well, engineers would have to let oil gush into the water for a relatively short time to reduce pressure as the containment systems started.
Whatever decisions are made after the test, officials say work on a relief well would continue. It is considered the ultimate solution because it would permanently plug the runaway well.
On Friday, Admiral Allen said that the test results were ambiguous, and that the possibility remained that the well had been breached and that oil and gas were escaping into the surrounding rock and even into the gulf.
But Mr. Wells said on Saturday that there were still no signs of any leakage into the rock formation or up through the seabed into the water. “There’s no evidence that we don’t have integrity,” he said.
He said scientists were “not at all surprised” that pressure readings, while higher than had been forecast if the well was badly damaged, were lower than had been expected if the well was intact. One explanation could be that the reservoir of oil had been depleted by the gushing well, he said.
Mr. Wells said pressure in the well was still slowly rising, which he said was a good sign. Temperature readings showed that the well had cooled off; if oil was still flowing out through a leak, temperatures would be expected to be higher.
Scientists were reviewing data from seismic and sonar surveys as well, which could show if oil was leaking into shallow rock formations. And two remotely operated submersibles had video cameras trained on the seabed.
Video showed occasional small gas bubbles emerging from a valve on the topmost section of casing pipe, which starts at the seabed and is three feet in diameter. Mr. Wells said that instruments would sample the gas as a precaution, but he said that such bubbles were commonly seen coming from subsea wells.
Peter Baker contributed reporting from Washington, and Rogene Fisher Jacquette and Liz Robbins from New York.
By HENRY FOUNTAIN
As the Gulf of Mexico entered a third day free of fresh oil from BP’s blown-out well, a company official said Saturday that there were still no signs of damage in the 13,000-foot-deep hole.
“We’re very encouraged at this point,” said Kent Wells, a senior vice president of BP. He said that a test to assess the condition of the well was continuing, and that any decision to end it would be made by Thad W. Allen, the retired Coast Guard admiral who commands the spill response.
“The longer the test goes, the more confidence we have in it,” Mr. Wells said. “But we don’t want to jump ahead of the process we’ve laid out. Admiral Allen is the ultimate decision maker.”
The test that began on Thursday afternoon with the closing of valves on a new, tighter-sealing cap atop the well had exceeded 48 hours. Officials had said that would likely be the upper time limit for the test, though they had said the procedure could be extended.
With the valves closed, oil stopped gushing into the gulf for the first time since the disaster began with the explosion of the Deepwater Horizon drilling rig on April 20.
The test will help determine whether the well can remain shut off or whether it must be reopened and containment systems restarted.
Two vessels that had been collecting oil through pipes at the well head are on standby, Mr. Wells said, and a third, the Discoverer Enterprise, could be brought in quickly with a device to funnel oil from the top of the cap.
With three containment systems working, Mr. Wells said, “We could very well be collecting all the flow at that point.” The flow rate is estimated at 35,000 to 60,000 barrels of oil per day.
But in reopening the well, engineers would have to let oil gush into the water for a relatively short time to reduce pressure as the containment systems started.
Whatever decisions are made after the test, officials say work on a relief well would continue. It is considered the ultimate solution because it would permanently plug the runaway well.
On Friday, Admiral Allen said that the test results were ambiguous, and that the possibility remained that the well had been breached and that oil and gas were escaping into the surrounding rock and even into the gulf.
But Mr. Wells said on Saturday that there were still no signs of any leakage into the rock formation or up through the seabed into the water. “There’s no evidence that we don’t have integrity,” he said.
He said scientists were “not at all surprised” that pressure readings, while higher than had been forecast if the well was badly damaged, were lower than had been expected if the well was intact. One explanation could be that the reservoir of oil had been depleted by the gushing well, he said.
Mr. Wells said pressure in the well was still slowly rising, which he said was a good sign. Temperature readings showed that the well had cooled off; if oil was still flowing out through a leak, temperatures would be expected to be higher.
Scientists were reviewing data from seismic and sonar surveys as well, which could show if oil was leaking into shallow rock formations. And two remotely operated submersibles had video cameras trained on the seabed.
Video showed occasional small gas bubbles emerging from a valve on the topmost section of casing pipe, which starts at the seabed and is three feet in diameter. Mr. Wells said that instruments would sample the gas as a precaution, but he said that such bubbles were commonly seen coming from subsea wells.
Peter Baker contributed reporting from Washington, and Rogene Fisher Jacquette and Liz Robbins from New York.
By HENRY FOUNTAIN
As the Gulf of Mexico entered a third day free of fresh oil from BP’s blown-out well, a company official said Saturday that there were still no signs of damage in the 13,000-foot-deep hole.
“We’re very encouraged at this point,” said Kent Wells, a senior vice president of BP. He said that a test to assess the condition of the well was continuing, and that any decision to end it would be made by Thad W. Allen, the retired Coast Guard admiral who commands the spill response.
“The longer the test goes, the more confidence we have in it,” Mr. Wells said. “But we don’t want to jump ahead of the process we’ve laid out. Admiral Allen is the ultimate decision maker.”
The test that began on Thursday afternoon with the closing of valves on a new, tighter-sealing cap atop the well had exceeded 48 hours. Officials had said that would likely be the upper time limit for the test, though they had said the procedure could be extended.
With the valves closed, oil stopped gushing into the gulf for the first time since the disaster began with the explosion of the Deepwater Horizon drilling rig on April 20.
The test will help determine whether the well can remain shut off or whether it must be reopened and containment systems restarted.
Two vessels that had been collecting oil through pipes at the well head are on standby, Mr. Wells said, and a third, the Discoverer Enterprise, could be brought in quickly with a device to funnel oil from the top of the cap.
With three containment systems working, Mr. Wells said, “We could very well be collecting all the flow at that point.” The flow rate is estimated at 35,000 to 60,000 barrels of oil per day.
But in reopening the well, engineers would have to let oil gush into the water for a relatively short time to reduce pressure as the containment systems started.
Whatever decisions are made after the test, officials say work on a relief well would continue. It is considered the ultimate solution because it would permanently plug the runaway well.
On Friday, Admiral Allen said that the test results were ambiguous, and that the possibility remained that the well had been breached and that oil and gas were escaping into the surrounding rock and even into the gulf.
But Mr. Wells said on Saturday that there were still no signs of any leakage into the rock formation or up through the seabed into the water. “There’s no evidence that we don’t have integrity,” he said.
He said scientists were “not at all surprised” that pressure readings, while higher than had been forecast if the well was badly damaged, were lower than had been expected if the well was intact. One explanation could be that the reservoir of oil had been depleted by the gushing well, he said.
Mr. Wells said pressure in the well was still slowly rising, which he said was a good sign. Temperature readings showed that the well had cooled off; if oil was still flowing out through a leak, temperatures would be expected to be higher.
Scientists were reviewing data from seismic and sonar surveys as well, which could show if oil was leaking into shallow rock formations. And two remotely operated submersibles had video cameras trained on the seabed.
Video showed occasional small gas bubbles emerging from a valve on the topmost section of casing pipe, which starts at the seabed and is three feet in diameter. Mr. Wells said that instruments would sample the gas as a precaution, but he said that such bubbles were commonly seen coming from subsea wells.
Peter Baker contributed reporting from Washington, and Rogene Fisher Jacquette and Liz Robbins from New York.
http://www.nytimes.com/2010/07/18/us/18spill.html?exprod=myyahoo
As the Gulf of Mexico entered a third day free of fresh oil from BP’s blown-out well, a company official said Saturday that there were still no signs of damage in the 13,000-foot-deep hole.
“We’re very encouraged at this point,” said Kent Wells, a senior vice president of BP. He said that a test to assess the condition of the well was continuing, and that any decision to end it would be made by Thad W. Allen, the retired Coast Guard admiral who commands the spill response.
“The longer the test goes, the more confidence we have in it,” Mr. Wells said. “But we don’t want to jump ahead of the process we’ve laid out. Admiral Allen is the ultimate decision maker.”
The test that began on Thursday afternoon with the closing of valves on a new, tighter-sealing cap atop the well had exceeded 48 hours. Officials had said that would likely be the upper time limit for the test, though they had said the procedure could be extended.
With the valves closed, oil stopped gushing into the gulf for the first time since the disaster began with the explosion of the Deepwater Horizon drilling rig on April 20.
The test will help determine whether the well can remain shut off or whether it must be reopened and containment systems restarted.
Two vessels that had been collecting oil through pipes at the well head are on standby, Mr. Wells said, and a third, the Discoverer Enterprise, could be brought in quickly with a device to funnel oil from the top of the cap.
With three containment systems working, Mr. Wells said, “We could very well be collecting all the flow at that point.” The flow rate is estimated at 35,000 to 60,000 barrels of oil per day.
But in reopening the well, engineers would have to let oil gush into the water for a relatively short time to reduce pressure as the containment systems started.
Whatever decisions are made after the test, officials say work on a relief well would continue. It is considered the ultimate solution because it would permanently plug the runaway well.
On Friday, Admiral Allen said that the test results were ambiguous, and that the possibility remained that the well had been breached and that oil and gas were escaping into the surrounding rock and even into the gulf.
But Mr. Wells said on Saturday that there were still no signs of any leakage into the rock formation or up through the seabed into the water. “There’s no evidence that we don’t have integrity,” he said.
He said scientists were “not at all surprised” that pressure readings, while higher than had been forecast if the well was badly damaged, were lower than had been expected if the well was intact. One explanation could be that the reservoir of oil had been depleted by the gushing well, he said.
Mr. Wells said pressure in the well was still slowly rising, which he said was a good sign. Temperature readings showed that the well had cooled off; if oil was still flowing out through a leak, temperatures would be expected to be higher.
Scientists were reviewing data from seismic and sonar surveys as well, which could show if oil was leaking into shallow rock formations. And two remotely operated submersibles had video cameras trained on the seabed.
Video showed occasional small gas bubbles emerging from a valve on the topmost section of casing pipe, which starts at the seabed and is three feet in diameter. Mr. Wells said that instruments would sample the gas as a precaution, but he said that such bubbles were commonly seen coming from subsea wells.
Peter Baker contributed reporting from Washington, and Rogene Fisher Jacquette and Liz Robbins from New York.
By HENRY FOUNTAIN
As the Gulf of Mexico entered a third day free of fresh oil from BP’s blown-out well, a company official said Saturday that there were still no signs of damage in the 13,000-foot-deep hole.
“We’re very encouraged at this point,” said Kent Wells, a senior vice president of BP. He said that a test to assess the condition of the well was continuing, and that any decision to end it would be made by Thad W. Allen, the retired Coast Guard admiral who commands the spill response.
“The longer the test goes, the more confidence we have in it,” Mr. Wells said. “But we don’t want to jump ahead of the process we’ve laid out. Admiral Allen is the ultimate decision maker.”
The test that began on Thursday afternoon with the closing of valves on a new, tighter-sealing cap atop the well had exceeded 48 hours. Officials had said that would likely be the upper time limit for the test, though they had said the procedure could be extended.
With the valves closed, oil stopped gushing into the gulf for the first time since the disaster began with the explosion of the Deepwater Horizon drilling rig on April 20.
The test will help determine whether the well can remain shut off or whether it must be reopened and containment systems restarted.
Two vessels that had been collecting oil through pipes at the well head are on standby, Mr. Wells said, and a third, the Discoverer Enterprise, could be brought in quickly with a device to funnel oil from the top of the cap.
With three containment systems working, Mr. Wells said, “We could very well be collecting all the flow at that point.” The flow rate is estimated at 35,000 to 60,000 barrels of oil per day.
But in reopening the well, engineers would have to let oil gush into the water for a relatively short time to reduce pressure as the containment systems started.
Whatever decisions are made after the test, officials say work on a relief well would continue. It is considered the ultimate solution because it would permanently plug the runaway well.
On Friday, Admiral Allen said that the test results were ambiguous, and that the possibility remained that the well had been breached and that oil and gas were escaping into the surrounding rock and even into the gulf.
But Mr. Wells said on Saturday that there were still no signs of any leakage into the rock formation or up through the seabed into the water. “There’s no evidence that we don’t have integrity,” he said.
He said scientists were “not at all surprised” that pressure readings, while higher than had been forecast if the well was badly damaged, were lower than had been expected if the well was intact. One explanation could be that the reservoir of oil had been depleted by the gushing well, he said.
Mr. Wells said pressure in the well was still slowly rising, which he said was a good sign. Temperature readings showed that the well had cooled off; if oil was still flowing out through a leak, temperatures would be expected to be higher.
Scientists were reviewing data from seismic and sonar surveys as well, which could show if oil was leaking into shallow rock formations. And two remotely operated submersibles had video cameras trained on the seabed.
Video showed occasional small gas bubbles emerging from a valve on the topmost section of casing pipe, which starts at the seabed and is three feet in diameter. Mr. Wells said that instruments would sample the gas as a precaution, but he said that such bubbles were commonly seen coming from subsea wells.
Peter Baker contributed reporting from Washington, and Rogene Fisher Jacquette and Liz Robbins from New York.
By HENRY FOUNTAIN
As the Gulf of Mexico entered a third day free of fresh oil from BP’s blown-out well, a company official said Saturday that there were still no signs of damage in the 13,000-foot-deep hole.
“We’re very encouraged at this point,” said Kent Wells, a senior vice president of BP. He said that a test to assess the condition of the well was continuing, and that any decision to end it would be made by Thad W. Allen, the retired Coast Guard admiral who commands the spill response.
“The longer the test goes, the more confidence we have in it,” Mr. Wells said. “But we don’t want to jump ahead of the process we’ve laid out. Admiral Allen is the ultimate decision maker.”
The test that began on Thursday afternoon with the closing of valves on a new, tighter-sealing cap atop the well had exceeded 48 hours. Officials had said that would likely be the upper time limit for the test, though they had said the procedure could be extended.
With the valves closed, oil stopped gushing into the gulf for the first time since the disaster began with the explosion of the Deepwater Horizon drilling rig on April 20.
The test will help determine whether the well can remain shut off or whether it must be reopened and containment systems restarted.
Two vessels that had been collecting oil through pipes at the well head are on standby, Mr. Wells said, and a third, the Discoverer Enterprise, could be brought in quickly with a device to funnel oil from the top of the cap.
With three containment systems working, Mr. Wells said, “We could very well be collecting all the flow at that point.” The flow rate is estimated at 35,000 to 60,000 barrels of oil per day.
But in reopening the well, engineers would have to let oil gush into the water for a relatively short time to reduce pressure as the containment systems started.
Whatever decisions are made after the test, officials say work on a relief well would continue. It is considered the ultimate solution because it would permanently plug the runaway well.
On Friday, Admiral Allen said that the test results were ambiguous, and that the possibility remained that the well had been breached and that oil and gas were escaping into the surrounding rock and even into the gulf.
But Mr. Wells said on Saturday that there were still no signs of any leakage into the rock formation or up through the seabed into the water. “There’s no evidence that we don’t have integrity,” he said.
He said scientists were “not at all surprised” that pressure readings, while higher than had been forecast if the well was badly damaged, were lower than had been expected if the well was intact. One explanation could be that the reservoir of oil had been depleted by the gushing well, he said.
Mr. Wells said pressure in the well was still slowly rising, which he said was a good sign. Temperature readings showed that the well had cooled off; if oil was still flowing out through a leak, temperatures would be expected to be higher.
Scientists were reviewing data from seismic and sonar surveys as well, which could show if oil was leaking into shallow rock formations. And two remotely operated submersibles had video cameras trained on the seabed.
Video showed occasional small gas bubbles emerging from a valve on the topmost section of casing pipe, which starts at the seabed and is three feet in diameter. Mr. Wells said that instruments would sample the gas as a precaution, but he said that such bubbles were commonly seen coming from subsea wells.
Peter Baker contributed reporting from Washington, and Rogene Fisher Jacquette and Liz Robbins from New York.
http://www.nytimes.com/2010/07/18/us/18spill.html?exprod=myyahoo
Thursday, July 8, 2010
Oil containment effort facing 2 key moments
By Mark Seibel, McClatchy Newspapers Mark Seibel, Mcclatchy Newspapers
Wed Jul 7, 7:01 pm ET
.WASHINGTON — The battle to contain BP's massive Deepwater Horizon oil spill in the Gulf of Mexico is approaching two critical junctures in coming days that could affect how the months-long catastrophe ends.
The first will happen for sure: the connection of a third ship to the jury-rigged containment system through which BP has been capturing about 24,000 barrels of oil per day since early June. That may take place as soon as this weekend, depending on how rough the seas are, and it would raise the amount of oil that BP can collect from the well to as much as 53,000 barrels per day. That's 88 percent of the 60,000 barrels per day that the government says is the current best guess of the maximum amount that's gushing from the well.
The second may not happen: replacing the "top hat" component of that containment system with a new cap that would fit more snugly but whose installation would require that the well be uncapped for as long as 10 days, allowing tens of thousands of additional barrels of crude to spew into the Gulf.
The new containment cap was the subject of Cabinet-level meetings in Washington last week, including one with President Barack Obama , and the decision remains uncertain.
Retired Coast Guard Adm. Thad Allen said Wednesday that he'd had more meetings on the topic with BP officials Tuesday in Houston and that more meetings were scheduled for when he returned to Washington this week.
"We are still reviewing the technical specifications . . . the amount of time . . . and the weather window that it would take" for installation, Allen said. He was unwilling to lay odds on whether the new cap would be approved.
"I wouldn't want to attach a percentage right now," he said.
Adding the third ship, the Helix Producer I, has been planned for weeks and was supposed to have happened by June 30 . High seas generated by Hurricane Alex and then by an unnamed storm system near the Mexico's Yucatan peninsula so far have thwarted the final few days of work, however.
Allen said he flew to the Deepwater Horizon site on Wednesday in part to assess weather conditions.
In a conference call from the Discoverer Enterprise, the drilling ship that's taking on oil from the well through the "top hat," Allen said that the waves buffeting the area were 4 to 6 feet tall, still too high to complete the final connections between the Helix Producer I and the Deepwater Horizon's failed blowout preventer.
Forecasts anticipate calmer seas in the next 48 hours, he said, after which the last of the work hooking up undersea hoses should take three days.
The addition of the Helix Producer I is likely to re-energize the controversy over just how much oil is escaping from the well. A government panel of scientists estimated last month that the well is leaking anywhere from 35,000 to 60,000 barrels per day.
Once the Helix Producer I is connected, however, the lower end of those estimates could well be proved moot, increasing pressure on the Obama administration and BP to determine the high end of the gusher more precisely.
While the two vessels that currently collecting oil have a combined maximum capacity of just 28,000 barrels per day — below the government's minimum estimates — the three ships together easily could capture 40,000 to 53,000 barrels a day, well in excess of the minimum range.
The Helix Producer I can take 20,000 to 25,000 barrels per day, officials have said. The Discoverer Enterprise has a stated capacity of 18,000 barrels per day, though it's been collecting an average of about 15,000 barrels on most days, and the Q4000 drilling rig, which is burning the oil it collects, can dispose of 10,000 barrels a day, though it recent days it's been averaging something more than 8,000 barrels daily.
Allen acknowledged that people watching the oil well via a video feed on BP's website — a near-constant presence during newscasts from the Gulf on cable television — will still see crude billowing into the water after the Helix Producer I begins operating.
He tried to put the best possible face on that likelihood, however, saying that as long as oil is coming out of the cap, it means that seawater isn't leaking in, something that would risk the formation of icelike crystals known as hydrates, which would render the top hat unusable.
"Oil in the water is never a good thing," he said. "But some oil that comes out around that seal right now is actually the price of being able to produce up to 25,000 barrels a day and maybe up to close to 53,000 when we get the Helix Producer online. . . . We've got to have a little bit of oil coming out, not water coming in, to avoid the hydrate problem."
The new containment cap under consideration would seal off the well completely because it would be bolted directly to the blowout preventer rather than sitting loosely atop a sheared-off pipe.
Officials have said previously that the new containment cap is necessary for BP to reach the 80,000-barrel-per-day capacity that the government has required the oil giant to achieve. Allen didn't say how that requirement would be affected if officials decide that installing the cap is too risky.
Allen also gave a tepid review of a massive oil-skimming vessel from Taiwan that began tests over the weekend in the Gulf. Critics of the Obama administration's oil spill response have charged that the administration's unwillingness to waive legal restrictions on foreign vessels in U.S. waters delayed the deployment of the A Whale. In fact, the ship, an oil tanker, was being reconfigured in Portugal to skim oil and arrived in the Gulf only last week.
Allen said the tests had shown the A Whale to be so large that it needed "large patches of oil to be effective" and "requires a large amount of maneuvering room."
"I don't have the final evaluation from our research and development folks that are on site," he said of the A Whale tests, "but, in a word, I would say inconclusive."
http://news.yahoo.com/s/mcclatchy/20100707/sc_mcclatchy/3559853/print
Wed Jul 7, 7:01 pm ET
.WASHINGTON — The battle to contain BP's massive Deepwater Horizon oil spill in the Gulf of Mexico is approaching two critical junctures in coming days that could affect how the months-long catastrophe ends.
The first will happen for sure: the connection of a third ship to the jury-rigged containment system through which BP has been capturing about 24,000 barrels of oil per day since early June. That may take place as soon as this weekend, depending on how rough the seas are, and it would raise the amount of oil that BP can collect from the well to as much as 53,000 barrels per day. That's 88 percent of the 60,000 barrels per day that the government says is the current best guess of the maximum amount that's gushing from the well.
The second may not happen: replacing the "top hat" component of that containment system with a new cap that would fit more snugly but whose installation would require that the well be uncapped for as long as 10 days, allowing tens of thousands of additional barrels of crude to spew into the Gulf.
The new containment cap was the subject of Cabinet-level meetings in Washington last week, including one with President Barack Obama , and the decision remains uncertain.
Retired Coast Guard Adm. Thad Allen said Wednesday that he'd had more meetings on the topic with BP officials Tuesday in Houston and that more meetings were scheduled for when he returned to Washington this week.
"We are still reviewing the technical specifications . . . the amount of time . . . and the weather window that it would take" for installation, Allen said. He was unwilling to lay odds on whether the new cap would be approved.
"I wouldn't want to attach a percentage right now," he said.
Adding the third ship, the Helix Producer I, has been planned for weeks and was supposed to have happened by June 30 . High seas generated by Hurricane Alex and then by an unnamed storm system near the Mexico's Yucatan peninsula so far have thwarted the final few days of work, however.
Allen said he flew to the Deepwater Horizon site on Wednesday in part to assess weather conditions.
In a conference call from the Discoverer Enterprise, the drilling ship that's taking on oil from the well through the "top hat," Allen said that the waves buffeting the area were 4 to 6 feet tall, still too high to complete the final connections between the Helix Producer I and the Deepwater Horizon's failed blowout preventer.
Forecasts anticipate calmer seas in the next 48 hours, he said, after which the last of the work hooking up undersea hoses should take three days.
The addition of the Helix Producer I is likely to re-energize the controversy over just how much oil is escaping from the well. A government panel of scientists estimated last month that the well is leaking anywhere from 35,000 to 60,000 barrels per day.
Once the Helix Producer I is connected, however, the lower end of those estimates could well be proved moot, increasing pressure on the Obama administration and BP to determine the high end of the gusher more precisely.
While the two vessels that currently collecting oil have a combined maximum capacity of just 28,000 barrels per day — below the government's minimum estimates — the three ships together easily could capture 40,000 to 53,000 barrels a day, well in excess of the minimum range.
The Helix Producer I can take 20,000 to 25,000 barrels per day, officials have said. The Discoverer Enterprise has a stated capacity of 18,000 barrels per day, though it's been collecting an average of about 15,000 barrels on most days, and the Q4000 drilling rig, which is burning the oil it collects, can dispose of 10,000 barrels a day, though it recent days it's been averaging something more than 8,000 barrels daily.
Allen acknowledged that people watching the oil well via a video feed on BP's website — a near-constant presence during newscasts from the Gulf on cable television — will still see crude billowing into the water after the Helix Producer I begins operating.
He tried to put the best possible face on that likelihood, however, saying that as long as oil is coming out of the cap, it means that seawater isn't leaking in, something that would risk the formation of icelike crystals known as hydrates, which would render the top hat unusable.
"Oil in the water is never a good thing," he said. "But some oil that comes out around that seal right now is actually the price of being able to produce up to 25,000 barrels a day and maybe up to close to 53,000 when we get the Helix Producer online. . . . We've got to have a little bit of oil coming out, not water coming in, to avoid the hydrate problem."
The new containment cap under consideration would seal off the well completely because it would be bolted directly to the blowout preventer rather than sitting loosely atop a sheared-off pipe.
Officials have said previously that the new containment cap is necessary for BP to reach the 80,000-barrel-per-day capacity that the government has required the oil giant to achieve. Allen didn't say how that requirement would be affected if officials decide that installing the cap is too risky.
Allen also gave a tepid review of a massive oil-skimming vessel from Taiwan that began tests over the weekend in the Gulf. Critics of the Obama administration's oil spill response have charged that the administration's unwillingness to waive legal restrictions on foreign vessels in U.S. waters delayed the deployment of the A Whale. In fact, the ship, an oil tanker, was being reconfigured in Portugal to skim oil and arrived in the Gulf only last week.
Allen said the tests had shown the A Whale to be so large that it needed "large patches of oil to be effective" and "requires a large amount of maneuvering room."
"I don't have the final evaluation from our research and development folks that are on site," he said of the A Whale tests, "but, in a word, I would say inconclusive."
http://news.yahoo.com/s/mcclatchy/20100707/sc_mcclatchy/3559853/print
Wednesday, July 7, 2010
Slick Rick's Sick Shtick is Latest Trick
Another GOP operative's name comes up in Texas Green Party ballot case
By WAYNE SLATER / The Dallas Morning News
wslater@dallasnews.com
AUSTIN — A Republican consultant with ties to Gov. Rick Perry is the latest in a growing number of GOP operatives described in court documents as helping the Green Party get on the Texas ballot. Anthony Holm, whose political-consulting firm represents Gov. Rick Perry’s campaign and the state GOP, said Tuesday that he talked with Green Party officials numerous times in recent months about fielding candidates.
But Holm disputed an e-mail suggesting he could provide funding for a petition drive to put the party on the November ballot.
Democrats contend that the liberal Green candidate for governor would help Perry by siphoning votes from Democrat Bill White. The Perry campaign denies involvement.
The Democratic Party contends the petition drive was illegally financed with corporate money. The Texas Supreme Court has cleared the way for the Green Party to certify candidates while it reviews the case.
At issue is the legality of a GOP-backed signature-gathering effort bankrolled with $532,000 from an out-of-state nonprofit corporation. The source of the money remains a mystery.
In March, when the Green Party was struggling to get signatures, state coordinator Kat Swift told party officials in an e-mail that big Republican money was coming to the rescue.
“I just got a call that a Republican in Texas wants to give us 40 percent of the cost of petitioning,” Swift wrote. “I got his name! Anthony Holm.”
Holm says he told Swift he couldn’t provide any money. But he said he supports the Green Party’s bid to be on the ballot and has provided informal political advice.
Holm is a partner in an Austin consulting firm, and his clients include Houston homebuilder Bob Perry, the state’s most prolific contributor. Holm said the builder, who is the biggest campaign donor to the governor but is not related to him, was not involved in helping the Green Party.
“Bob Perry did not contribute one penny to this effort,” Holm said.
Holm is among several GOP figures linked to the Green Party petition case. At the time of Swift’s e-mail, the party was being assisted by former Perry chief of staff Mike Toomey, now a lobbyist.
When that petition effort sputtered, out-of-state Republicans with ties to the governor’s chief political strategist, Dave Carney, took over. They paid a petition-drive company to collect 92,000 signatures, which were turned over to the Green Party as an in-kind contribution.
Democratic strategist Matt Angle said the party wants to know who paid for the drive.
“It is no longer credible for Rick Perry to deny his campaign’s involvement in the ballot scandal,” Angle said. “At least three of his closest political associates have been connected to the scheme.”
Perry spokesman Mark Miner said whoever funded the effort to help the Green Party did so on his own, not in connection with the campaign.
http://www.dallasnews.com/sharedcontent/dws/dn/yahoolatestnews/stories/070710dntexgreenparty.11555ac8a.html
By WAYNE SLATER / The Dallas Morning News
wslater@dallasnews.com
AUSTIN — A Republican consultant with ties to Gov. Rick Perry is the latest in a growing number of GOP operatives described in court documents as helping the Green Party get on the Texas ballot. Anthony Holm, whose political-consulting firm represents Gov. Rick Perry’s campaign and the state GOP, said Tuesday that he talked with Green Party officials numerous times in recent months about fielding candidates.
But Holm disputed an e-mail suggesting he could provide funding for a petition drive to put the party on the November ballot.
Democrats contend that the liberal Green candidate for governor would help Perry by siphoning votes from Democrat Bill White. The Perry campaign denies involvement.
The Democratic Party contends the petition drive was illegally financed with corporate money. The Texas Supreme Court has cleared the way for the Green Party to certify candidates while it reviews the case.
At issue is the legality of a GOP-backed signature-gathering effort bankrolled with $532,000 from an out-of-state nonprofit corporation. The source of the money remains a mystery.
In March, when the Green Party was struggling to get signatures, state coordinator Kat Swift told party officials in an e-mail that big Republican money was coming to the rescue.
“I just got a call that a Republican in Texas wants to give us 40 percent of the cost of petitioning,” Swift wrote. “I got his name! Anthony Holm.”
Holm says he told Swift he couldn’t provide any money. But he said he supports the Green Party’s bid to be on the ballot and has provided informal political advice.
Holm is a partner in an Austin consulting firm, and his clients include Houston homebuilder Bob Perry, the state’s most prolific contributor. Holm said the builder, who is the biggest campaign donor to the governor but is not related to him, was not involved in helping the Green Party.
“Bob Perry did not contribute one penny to this effort,” Holm said.
Holm is among several GOP figures linked to the Green Party petition case. At the time of Swift’s e-mail, the party was being assisted by former Perry chief of staff Mike Toomey, now a lobbyist.
When that petition effort sputtered, out-of-state Republicans with ties to the governor’s chief political strategist, Dave Carney, took over. They paid a petition-drive company to collect 92,000 signatures, which were turned over to the Green Party as an in-kind contribution.
Democratic strategist Matt Angle said the party wants to know who paid for the drive.
“It is no longer credible for Rick Perry to deny his campaign’s involvement in the ballot scandal,” Angle said. “At least three of his closest political associates have been connected to the scheme.”
Perry spokesman Mark Miner said whoever funded the effort to help the Green Party did so on his own, not in connection with the campaign.
http://www.dallasnews.com/sharedcontent/dws/dn/yahoolatestnews/stories/070710dntexgreenparty.11555ac8a.html
Tuesday, July 6, 2010
Federal Government Sues Over Arizona Immigration LawBy JULIA PRESTON
The Justice Department filed a lawsuit on Tuesday against Arizona to challenge a new state law designed to combat illegal immigration, arguing it would undermine the federal government’s pursuit of terrorists, gang members and other criminal immigrants.
The suit, filed in federal court in Phoenix, had been expected since mid-June, when Obama administration officials first disclosed they would contest Arizona directly, adding to several other suits seeking to strike down the law.
The federal government added its weight to the core argument in those suits, which contend that the Arizona law usurps powers to control immigration reserved for federal authorities. The main one of those suits was brought by the American Civil Liberties Union, the Mexican American Legal Defense and Educational Fund and other civil rights groups.
“Arizonans are understandably frustrated with illegal immigration,” Attorney General Eric H. Holder Jr. said. “But diverting federal resources away from dangerous aliens such as terrorism suspects and aliens with criminal records will impact the entire country’s safety.”
The Justice Department suit is also aimed at stemming a tide of laws like the Arizona statute under consideration in other states. “The Constitution and the federal immigration laws do not permit the development of a patchwork of state and local immigration policies throughout the country,” the suit says.
Justice officials are “sending an unmistakable cannon shot across the bow of any other state that might be tempted to follow Arizona’s misguided approach,” said Lucas Guttentag, director of the immigrants’ rights project for the A.C.L.U., and an author of that group’s suit.
The Justice Department asked for a court injunction to prevent the Arizona law from taking effect as currently scheduled on July 29. Hearings in the other cases are scheduled for July 15 and 22. The law, signed by Gov. Jan Brewer on April 23, makes it a crime to be an illegal immigrant in the state and requires law enforcement officers to determine the immigration status of people they stop based on a “reasonable suspicion” they might be illegal immigrants.
White House officials said President Obama was not involved in the Justice Department’s decision to sue. But the suit came after recent steps by the president to frame the immigration debate to favor Democrats in advance of mid-term elections in November, including a speech Thursday where he restated his commitment to overhaul legislation that would give legal status to millions of illegal immigrants. He gave no timetable for that debate.
The suit deepened the controversy over the Arizona law. Representative Darrell Issa, a Republican from California, said the president was wasting resources that should be spent controlling the southwest border.
“For President Obama to stand in the way of a state which has taken action to stand up for its citizens against the daily threat of violence and fear is disgraceful and a betrayal of his Constitutional obligation to protect our citizens,” said Mr. Issa, one of 19 Republicans signing a letter criticizing the suit.
Kris Kobach, a lawyer and consultant to Governor Brewer who is a co-author of the Arizona statute, said it was tailored to complement federal law. The Justice Department’s suit is “unnecessary,” he said, and “the suspicion is this is more about politics than law.”
In a background call with reporters, a senior department official said the decision to file the lawsuit — and to do so on pre-emption grounds, rather than other civil rights issues like racial profiling — followed extensive deliberations with the Civil Rights Division and others inside the department, and a trip to Arizona to meet with state officials.
Should the department fail to convince the courts to block Arizona from enforcing the law, the official said, it would closely watch for signs that people of Hispanic appearance were being targeted.
Charles Savage contributed reporting from Washington.
http://www.nytimes.com/2010/07/07/us/07immig.html?_r=1&exprod=myyahoo&pagewanted=print
The suit, filed in federal court in Phoenix, had been expected since mid-June, when Obama administration officials first disclosed they would contest Arizona directly, adding to several other suits seeking to strike down the law.
The federal government added its weight to the core argument in those suits, which contend that the Arizona law usurps powers to control immigration reserved for federal authorities. The main one of those suits was brought by the American Civil Liberties Union, the Mexican American Legal Defense and Educational Fund and other civil rights groups.
“Arizonans are understandably frustrated with illegal immigration,” Attorney General Eric H. Holder Jr. said. “But diverting federal resources away from dangerous aliens such as terrorism suspects and aliens with criminal records will impact the entire country’s safety.”
The Justice Department suit is also aimed at stemming a tide of laws like the Arizona statute under consideration in other states. “The Constitution and the federal immigration laws do not permit the development of a patchwork of state and local immigration policies throughout the country,” the suit says.
Justice officials are “sending an unmistakable cannon shot across the bow of any other state that might be tempted to follow Arizona’s misguided approach,” said Lucas Guttentag, director of the immigrants’ rights project for the A.C.L.U., and an author of that group’s suit.
The Justice Department asked for a court injunction to prevent the Arizona law from taking effect as currently scheduled on July 29. Hearings in the other cases are scheduled for July 15 and 22. The law, signed by Gov. Jan Brewer on April 23, makes it a crime to be an illegal immigrant in the state and requires law enforcement officers to determine the immigration status of people they stop based on a “reasonable suspicion” they might be illegal immigrants.
White House officials said President Obama was not involved in the Justice Department’s decision to sue. But the suit came after recent steps by the president to frame the immigration debate to favor Democrats in advance of mid-term elections in November, including a speech Thursday where he restated his commitment to overhaul legislation that would give legal status to millions of illegal immigrants. He gave no timetable for that debate.
The suit deepened the controversy over the Arizona law. Representative Darrell Issa, a Republican from California, said the president was wasting resources that should be spent controlling the southwest border.
“For President Obama to stand in the way of a state which has taken action to stand up for its citizens against the daily threat of violence and fear is disgraceful and a betrayal of his Constitutional obligation to protect our citizens,” said Mr. Issa, one of 19 Republicans signing a letter criticizing the suit.
Kris Kobach, a lawyer and consultant to Governor Brewer who is a co-author of the Arizona statute, said it was tailored to complement federal law. The Justice Department’s suit is “unnecessary,” he said, and “the suspicion is this is more about politics than law.”
In a background call with reporters, a senior department official said the decision to file the lawsuit — and to do so on pre-emption grounds, rather than other civil rights issues like racial profiling — followed extensive deliberations with the Civil Rights Division and others inside the department, and a trip to Arizona to meet with state officials.
Should the department fail to convince the courts to block Arizona from enforcing the law, the official said, it would closely watch for signs that people of Hispanic appearance were being targeted.
Charles Savage contributed reporting from Washington.
http://www.nytimes.com/2010/07/07/us/07immig.html?_r=1&exprod=myyahoo&pagewanted=print
Monday, July 5, 2010
As Oil Industry Fights a Tax, It Reaps Subsidies By DAVID KOCIENIEWSKI
When the Deepwater Horizon drilling platform set off the worst oil spill at sea in American history, it was flying the flag of the Marshall Islands. Registering there allowed the rig’s owner to significantly reduce its American taxes.
The owner, Transocean, moved its corporate headquarters from Houston to the Cayman Islands in 1999 and then to Switzerland in 2008, maneuvers that also helped it avoid taxes.
At the same time, BP was reaping sizable tax benefits from leasing the rig. According to a letter sent in June to the Senate Finance Committee, the company used a tax break for the oil industry to write off 70 percent of the rent for Deepwater Horizon — a deduction of more than $225,000 a day since the lease began.
With federal officials now considering a new tax on petroleum production to pay for the cleanup, the industry is fighting the measure, warning that it will lead to job losses and higher gasoline prices, as well as an increased dependence on foreign oil.
But an examination of the American tax code indicates that oil production is among the most heavily subsidized businesses, with tax breaks available at virtually every stage of the exploration and extraction process.
According to the most recent study by the Congressional Budget Office, released in 2005, capital investments like oil field leases and drilling equipment are taxed at an effective rate of 9 percent, significantly lower than the overall rate of 25 percent for businesses in general and lower than virtually any other industry.
And for many small and midsize oil companies, the tax on capital investments is so low that it is more than eliminated by var-ious credits. These companies’ returns on those investments are often higher after taxes than before.
“The flow of revenues to oil companies is like the gusher at the bottom of the Gulf of Mexico: heavy and constant,” said Senator Robert Menendez, Democrat of New Jersey, who has worked alongside the Obama administration on a bill that would cut $20 billion in oil industry tax breaks over the next decade. “There is no reason for these corporations to shortchange the American taxpayer.”
Oil industry officials say that the tax breaks, which average about $4 billion a year according to various government reports, are a bargain for taxpayers. By helping producers weather market fluctuations and invest in technology, tax incentives are supporting an industry that the officials say provides 9.2 million jobs.
The American Petroleum Institute, an industry advocacy group, argues that even with subsidies, oil producers paid or incurred $280 billion in American income taxes from 2006 to 2008, and pay a higher percentage of their earnings in taxes than most other American corporations.
As oil continues to spread across the Gulf of Mexico, however, the industry is being forced to defend tax breaks that some say are being abused or are outdated.
The Senate Finance Committee on Wednesday announced that it was investigating whether Transocean had exploited tax laws by moving overseas to avoid paying taxes in the United States. Efforts to curtail the tax breaks are likely to face fierce opposition in Congress; the oil and natural gas industry has spent $340 million on lobbyists since 2008, according to the nonpartisan Center for Responsive Politics, which monitors political spending.
Jack N. Gerard, president of the American Petroleum Institute, warns that any cut in subsidies will cost jobs.
“These companies evaluate costs, risks and opportunities across the globe,” he said. “So if the U.S. makes changes in the tax code that discourage drilling in gulf waters, they will go elsewhere and take their jobs with them.”
But some government watchdog groups say that only the industry’s political muscle is preserving the tax breaks. An economist for the Treasury Department said in 2009 that a study had found that oil prices and potential profits were so high that eliminating the subsidies would decrease American output by less than half of one percent.
“We’re giving tax breaks to highly profitable companies to do what they would be doing anyway,” said Sima J. Gandhi, a policy analyst at the Center for American Progress, a liberal research organization. “That’s not an incentive; that’s a giveaway.”
Some of the tax breaks date back nearly a century, when they were intended to encourage exploration in an era of rudimentary technology, when costly investments frequently produced only dry holes. Because of one lingering provision from the Tariff Act of 1913, many small and midsize oil companies based in the United States can claim deductions for the lost value of tapped oil fields far beyond the amount the companies actually paid for the oil rights.
Other tax breaks were born of international politics. In an attempt to deter Soviet influence in the Middle East in the 1950s, the State Department backed a Saudi Arabian accounting maneuver that reclassified the royalties charged by foreign governments to American oil drillers. Saudi Arabia and others began to treat some of the royalties as taxes, which entitled the companies to subtract those payments from their American tax bills. Despite repeated attempts to forbid this accounting practice, companies continue to deduct the payments. The Treasury Department estimates that it will cost $8.2 billion over the next decade.
Over the last 10 years, oil companies have also been aggressive in using foreign tax havens. Many rigs, like Deepwater Horizon, are registered in Panama or in the Marshall Islands, where they are subject to lower taxes and less stringent safety and staff regulations. American producers have also aggressively exploited the tax code by opening small offices in low-tax countries. A recent study by Martin A. Sullivan, an economist for the trade publication Tax Analysts, found that the five oil drilling companies that had undergone these “corporate inversions” had saved themselves a total of $4 billion in taxes since 1999.
Transocean — which has approximately 18,000 employees worldwide, including 1,300 in Houston and about a dozen in Zug, Switzerland — has saved $1.8 billion in taxes since moving overseas in 1999, the study found.
Transocean said it had paid more than $300 million in taxes so far for 2009, and that its move reflected its global scope, with only 15 of its 139 rigs located in the United States. “Transocean is truly a global company,” it said in a statement.
Despite the public anger at the gulf spill, it is far from certain that Congress will eliminate the tax breaks. As recently as 2005, when windfall profits for energy companies prompted even President George W. Bush — a former Texas oilman himself — to publicly call for an end to incentives, the energy bill he and Congress enacted still included $2.6 billion in oil subsidies. In 2007, after Democrats took control of Congress, a move to end the tax breaks failed.
Mr. Menendez said he believed the Gulf spill was devastating enough to spur Congress into action. But one notable omission in his bill shows the vast economic reach of the industry. While the legislation would cut many incentives over the next decade, it would not touch the tax breaks for oil refineries, many of which have operations and employees in his home state, New Jersey.
Mr. Menendez’s aides said the senator thought it was legitimate to allow refineries to continue claiming a manufacturing tax credit that he wants to eliminate for drillers because refining is a manufacturing business and because refineries do not benefit from high oil prices. Mr. Menendez did not consult with New Jersey refineries when writing the bill, his aides said.
http://www.nytimes.com/2010/07/04/business/04bptax.html?_r=1&pagewanted=print
The owner, Transocean, moved its corporate headquarters from Houston to the Cayman Islands in 1999 and then to Switzerland in 2008, maneuvers that also helped it avoid taxes.
At the same time, BP was reaping sizable tax benefits from leasing the rig. According to a letter sent in June to the Senate Finance Committee, the company used a tax break for the oil industry to write off 70 percent of the rent for Deepwater Horizon — a deduction of more than $225,000 a day since the lease began.
With federal officials now considering a new tax on petroleum production to pay for the cleanup, the industry is fighting the measure, warning that it will lead to job losses and higher gasoline prices, as well as an increased dependence on foreign oil.
But an examination of the American tax code indicates that oil production is among the most heavily subsidized businesses, with tax breaks available at virtually every stage of the exploration and extraction process.
According to the most recent study by the Congressional Budget Office, released in 2005, capital investments like oil field leases and drilling equipment are taxed at an effective rate of 9 percent, significantly lower than the overall rate of 25 percent for businesses in general and lower than virtually any other industry.
And for many small and midsize oil companies, the tax on capital investments is so low that it is more than eliminated by var-ious credits. These companies’ returns on those investments are often higher after taxes than before.
“The flow of revenues to oil companies is like the gusher at the bottom of the Gulf of Mexico: heavy and constant,” said Senator Robert Menendez, Democrat of New Jersey, who has worked alongside the Obama administration on a bill that would cut $20 billion in oil industry tax breaks over the next decade. “There is no reason for these corporations to shortchange the American taxpayer.”
Oil industry officials say that the tax breaks, which average about $4 billion a year according to various government reports, are a bargain for taxpayers. By helping producers weather market fluctuations and invest in technology, tax incentives are supporting an industry that the officials say provides 9.2 million jobs.
The American Petroleum Institute, an industry advocacy group, argues that even with subsidies, oil producers paid or incurred $280 billion in American income taxes from 2006 to 2008, and pay a higher percentage of their earnings in taxes than most other American corporations.
As oil continues to spread across the Gulf of Mexico, however, the industry is being forced to defend tax breaks that some say are being abused or are outdated.
The Senate Finance Committee on Wednesday announced that it was investigating whether Transocean had exploited tax laws by moving overseas to avoid paying taxes in the United States. Efforts to curtail the tax breaks are likely to face fierce opposition in Congress; the oil and natural gas industry has spent $340 million on lobbyists since 2008, according to the nonpartisan Center for Responsive Politics, which monitors political spending.
Jack N. Gerard, president of the American Petroleum Institute, warns that any cut in subsidies will cost jobs.
“These companies evaluate costs, risks and opportunities across the globe,” he said. “So if the U.S. makes changes in the tax code that discourage drilling in gulf waters, they will go elsewhere and take their jobs with them.”
But some government watchdog groups say that only the industry’s political muscle is preserving the tax breaks. An economist for the Treasury Department said in 2009 that a study had found that oil prices and potential profits were so high that eliminating the subsidies would decrease American output by less than half of one percent.
“We’re giving tax breaks to highly profitable companies to do what they would be doing anyway,” said Sima J. Gandhi, a policy analyst at the Center for American Progress, a liberal research organization. “That’s not an incentive; that’s a giveaway.”
Some of the tax breaks date back nearly a century, when they were intended to encourage exploration in an era of rudimentary technology, when costly investments frequently produced only dry holes. Because of one lingering provision from the Tariff Act of 1913, many small and midsize oil companies based in the United States can claim deductions for the lost value of tapped oil fields far beyond the amount the companies actually paid for the oil rights.
Other tax breaks were born of international politics. In an attempt to deter Soviet influence in the Middle East in the 1950s, the State Department backed a Saudi Arabian accounting maneuver that reclassified the royalties charged by foreign governments to American oil drillers. Saudi Arabia and others began to treat some of the royalties as taxes, which entitled the companies to subtract those payments from their American tax bills. Despite repeated attempts to forbid this accounting practice, companies continue to deduct the payments. The Treasury Department estimates that it will cost $8.2 billion over the next decade.
Over the last 10 years, oil companies have also been aggressive in using foreign tax havens. Many rigs, like Deepwater Horizon, are registered in Panama or in the Marshall Islands, where they are subject to lower taxes and less stringent safety and staff regulations. American producers have also aggressively exploited the tax code by opening small offices in low-tax countries. A recent study by Martin A. Sullivan, an economist for the trade publication Tax Analysts, found that the five oil drilling companies that had undergone these “corporate inversions” had saved themselves a total of $4 billion in taxes since 1999.
Transocean — which has approximately 18,000 employees worldwide, including 1,300 in Houston and about a dozen in Zug, Switzerland — has saved $1.8 billion in taxes since moving overseas in 1999, the study found.
Transocean said it had paid more than $300 million in taxes so far for 2009, and that its move reflected its global scope, with only 15 of its 139 rigs located in the United States. “Transocean is truly a global company,” it said in a statement.
Despite the public anger at the gulf spill, it is far from certain that Congress will eliminate the tax breaks. As recently as 2005, when windfall profits for energy companies prompted even President George W. Bush — a former Texas oilman himself — to publicly call for an end to incentives, the energy bill he and Congress enacted still included $2.6 billion in oil subsidies. In 2007, after Democrats took control of Congress, a move to end the tax breaks failed.
Mr. Menendez said he believed the Gulf spill was devastating enough to spur Congress into action. But one notable omission in his bill shows the vast economic reach of the industry. While the legislation would cut many incentives over the next decade, it would not touch the tax breaks for oil refineries, many of which have operations and employees in his home state, New Jersey.
Mr. Menendez’s aides said the senator thought it was legitimate to allow refineries to continue claiming a manufacturing tax credit that he wants to eliminate for drillers because refining is a manufacturing business and because refineries do not benefit from high oil prices. Mr. Menendez did not consult with New Jersey refineries when writing the bill, his aides said.
http://www.nytimes.com/2010/07/04/business/04bptax.html?_r=1&pagewanted=print
Saturday, July 3, 2010
In God We Trust by Thomas Love
As I was reading Paul Krugman’s column on Myths of Austerity, I thought of some of my Republican and Libertarian friends who so passionately defend the Free Market concept as seriously as religion. It then occurred to me, it is their religion. By insertion of those words on most of our currency, to them the currency became a religious artifact. A veritable presence of The Almighty Dollar is In God We Trust. How could American Capitalism become such a religion when Christ most famous act may well have been the chasing of the money lenders from the Temple?
The answer to this analogy may originate with The Supreme Court’s ruling that corporations have person hood. In other words, corporations enjoyed the same rights under the Fourteenth Amendment as did natural persons. However, this issue is absent from the court's opinion itself. In fact, this was stated as an opinion of The Justices as why they did not want to hear arguments on taxing the railroads. So is this flawed argument of what a document says, without saying it, a possible plank in this argument?
Could this concept have originated with Ronald Reagan, the darling of the Religious Right who stated that government was not the solution to America’s problems, but the cause, have been its architect? Well, his own son said the apparently rare churchgoer did not wear his religion on his sleeve. Despite actually being a regular churchgoer and Sunday school teacher, Jimmy Carter did not seem to share this notion, or did he? An analysis of his financial policy shows he inherited a recession. He initially tried to increase government spending and cut taxes, but eventually vetoed his own programs. He reduced the money supply and investments plummeted, lifetime savings were wiped out, and we had even higher unemployment with inflation.
One could argue that’s what the aforementioned Republicans and Libertarians(Tea Party?)wants to now do. Having elected George W Bush, who went about widely deregulating the economy, then watching in horror as it began to implode upon itself; many Republicans appear to have been reborn in the belief that an invisible hand (certainly not regulation) will right the ship of economic state.
Paul Krugman, the Nobel Prize winning economist does not appear to accept that myth. Stating in fact that extenuating factors are the real key to economic recovery, and pulling the plug too quickly before the patient has recovered from life support, is the far greater sin, than in this case is Blind Faith.
Jesus really cared about real people and real problems. Currency is no replacement for flesh and blood and invisible myths are no solace in face of hunger and evictions.
http://www.conservapedia.com/Jimmy_Carter
http://www.nytimes.com/2010/07/02/opinion/02krugman.html
http://www.nytimes.com/2010/07/03/us/politics/03memo.html
http://en.wikipedia.org/wiki/Santa_Clara_County_v._Southern_Pacific_Railroad
-Thomas P Love
The answer to this analogy may originate with The Supreme Court’s ruling that corporations have person hood. In other words, corporations enjoyed the same rights under the Fourteenth Amendment as did natural persons. However, this issue is absent from the court's opinion itself. In fact, this was stated as an opinion of The Justices as why they did not want to hear arguments on taxing the railroads. So is this flawed argument of what a document says, without saying it, a possible plank in this argument?
Could this concept have originated with Ronald Reagan, the darling of the Religious Right who stated that government was not the solution to America’s problems, but the cause, have been its architect? Well, his own son said the apparently rare churchgoer did not wear his religion on his sleeve. Despite actually being a regular churchgoer and Sunday school teacher, Jimmy Carter did not seem to share this notion, or did he? An analysis of his financial policy shows he inherited a recession. He initially tried to increase government spending and cut taxes, but eventually vetoed his own programs. He reduced the money supply and investments plummeted, lifetime savings were wiped out, and we had even higher unemployment with inflation.
One could argue that’s what the aforementioned Republicans and Libertarians(Tea Party?)wants to now do. Having elected George W Bush, who went about widely deregulating the economy, then watching in horror as it began to implode upon itself; many Republicans appear to have been reborn in the belief that an invisible hand (certainly not regulation) will right the ship of economic state.
Paul Krugman, the Nobel Prize winning economist does not appear to accept that myth. Stating in fact that extenuating factors are the real key to economic recovery, and pulling the plug too quickly before the patient has recovered from life support, is the far greater sin, than in this case is Blind Faith.
Jesus really cared about real people and real problems. Currency is no replacement for flesh and blood and invisible myths are no solace in face of hunger and evictions.
http://www.conservapedia.com/Jimmy_Carter
http://www.nytimes.com/2010/07/02/opinion/02krugman.html
http://www.nytimes.com/2010/07/03/us/politics/03memo.html
http://en.wikipedia.org/wiki/Santa_Clara_County_v._Southern_Pacific_Railroad
-Thomas P Love
Paul Krugman: Myths of Austerity
When I was young and naïve, I believed that important people took positions based on careful consideration of the options. Now I know better. Much of what Serious People believe rests on prejudices, not analysis. And these prejudices are subject to fads and fashions.
Which brings me to the subject of today’s column. For the last few months, I and others have watched, with amazement and horror, the emergence of a consensus in policy circles in favor of immediate fiscal austerity. That is, somehow it has become conventional wisdom that now is the time to slash spending, despite the fact that the world’s major economies remain deeply depressed.
This conventional wisdom isn’t based on either evidence or careful analysis. Instead, it rests on what we might charitably call sheer speculation, and less charitably call figments of the policy elite’s imagination — specifically, on belief in what I’ve come to think of as the invisible bond vigilante and the confidence fairy.
Bond vigilantes are investors who pull the plug on governments they perceive as unable or unwilling to pay their debts. Now there’s no question that countries can suffer crises of confidence (see Greece, debt of). But what the advocates of austerity claim is that (a) the bond vigilantes are about to attack America, and (b) spending anything more on stimulus will set them off.
What reason do we have to believe that any of this is true? Yes, America has long-run budget problems, but what we do on stimulus over the next couple of years has almost no bearing on our ability to deal with these long-run problems. As Douglas Elmendorf, the director of the Congressional Budget Office, recently put it, “There is no intrinsic contradiction between providing additional fiscal stimulus today, while the unemployment rate is high and many factories and offices are underused, and imposing fiscal restraint several years from now, when output and employment will probably be close to their potential.”
Nonetheless, every few months we’re told that the bond vigilantes have arrived, and we must impose austerity now now now to appease them. Three months ago, a slight uptick in long-term interest rates was greeted with near hysteria: “Debt Fears Send Rates Up,” was the headline at The Wall Street Journal, although there was no actual evidence of such fears, and Alan Greenspan pronounced the rise a “canary in the mine.”
Since then, long-term rates have plunged again. Far from fleeing U.S. government debt, investors evidently see it as their safest bet in a stumbling economy. Yet the advocates of austerity still assure us that bond vigilantes will attack any day now if we don’t slash spending immediately.
But don’t worry: spending cuts may hurt, but the confidence fairy will take away the pain. “The idea that austerity measures could trigger stagnation is incorrect,” declared Jean-Claude Trichet, the president of the European Central Bank, in a recent interview. Why? Because “confidence-inspiring policies will foster and not hamper economic recovery.”
What’s the evidence for the belief that fiscal contraction is actually expansionary, because it improves confidence? (By the way, this is precisely the doctrine expounded by Herbert Hoover in 1932.) Well, there have been historical cases of spending cuts and tax increases followed by economic growth. But as far as I can tell, every one of those examples proves, on closer examination, to be a case in which the negative effects of austerity were offset by other factors, factors not likely to be relevant today. For example, Ireland’s era of austerity-with-growth in the 1980s depended on a drastic move from trade deficit to trade surplus, which isn’t a strategy everyone can pursue at the same time.
And current examples of austerity are anything but encouraging. Ireland has been a good soldier in this crisis, grimly implementing savage spending cuts. Its reward has been a Depression-level slump — and financial markets continue to treat it as a serious default risk. Other good soldiers, like Latvia and Estonia, have done even worse — and all three nations have, believe it or not, had worse slumps in output and employment than Iceland, which was forced by the sheer scale of its financial crisis to adopt less orthodox policies.
So the next time you hear serious-sounding people explaining the need for fiscal austerity, try to parse their argument. Almost surely, you’ll discover that what sounds like hardheaded realism actually rests on a foundation of fantasy, on the belief that invisible vigilantes will punish us if we’re bad and the confidence fairy will reward us if we’re good. And real-world policy — policy that will blight the lives of millions of working families — is being built on that foundation.
http://www.nytimes.com/2010/07/02/opinion/02krugman.html?_r=2&ref=opinion
Which brings me to the subject of today’s column. For the last few months, I and others have watched, with amazement and horror, the emergence of a consensus in policy circles in favor of immediate fiscal austerity. That is, somehow it has become conventional wisdom that now is the time to slash spending, despite the fact that the world’s major economies remain deeply depressed.
This conventional wisdom isn’t based on either evidence or careful analysis. Instead, it rests on what we might charitably call sheer speculation, and less charitably call figments of the policy elite’s imagination — specifically, on belief in what I’ve come to think of as the invisible bond vigilante and the confidence fairy.
Bond vigilantes are investors who pull the plug on governments they perceive as unable or unwilling to pay their debts. Now there’s no question that countries can suffer crises of confidence (see Greece, debt of). But what the advocates of austerity claim is that (a) the bond vigilantes are about to attack America, and (b) spending anything more on stimulus will set them off.
What reason do we have to believe that any of this is true? Yes, America has long-run budget problems, but what we do on stimulus over the next couple of years has almost no bearing on our ability to deal with these long-run problems. As Douglas Elmendorf, the director of the Congressional Budget Office, recently put it, “There is no intrinsic contradiction between providing additional fiscal stimulus today, while the unemployment rate is high and many factories and offices are underused, and imposing fiscal restraint several years from now, when output and employment will probably be close to their potential.”
Nonetheless, every few months we’re told that the bond vigilantes have arrived, and we must impose austerity now now now to appease them. Three months ago, a slight uptick in long-term interest rates was greeted with near hysteria: “Debt Fears Send Rates Up,” was the headline at The Wall Street Journal, although there was no actual evidence of such fears, and Alan Greenspan pronounced the rise a “canary in the mine.”
Since then, long-term rates have plunged again. Far from fleeing U.S. government debt, investors evidently see it as their safest bet in a stumbling economy. Yet the advocates of austerity still assure us that bond vigilantes will attack any day now if we don’t slash spending immediately.
But don’t worry: spending cuts may hurt, but the confidence fairy will take away the pain. “The idea that austerity measures could trigger stagnation is incorrect,” declared Jean-Claude Trichet, the president of the European Central Bank, in a recent interview. Why? Because “confidence-inspiring policies will foster and not hamper economic recovery.”
What’s the evidence for the belief that fiscal contraction is actually expansionary, because it improves confidence? (By the way, this is precisely the doctrine expounded by Herbert Hoover in 1932.) Well, there have been historical cases of spending cuts and tax increases followed by economic growth. But as far as I can tell, every one of those examples proves, on closer examination, to be a case in which the negative effects of austerity were offset by other factors, factors not likely to be relevant today. For example, Ireland’s era of austerity-with-growth in the 1980s depended on a drastic move from trade deficit to trade surplus, which isn’t a strategy everyone can pursue at the same time.
And current examples of austerity are anything but encouraging. Ireland has been a good soldier in this crisis, grimly implementing savage spending cuts. Its reward has been a Depression-level slump — and financial markets continue to treat it as a serious default risk. Other good soldiers, like Latvia and Estonia, have done even worse — and all three nations have, believe it or not, had worse slumps in output and employment than Iceland, which was forced by the sheer scale of its financial crisis to adopt less orthodox policies.
So the next time you hear serious-sounding people explaining the need for fiscal austerity, try to parse their argument. Almost surely, you’ll discover that what sounds like hardheaded realism actually rests on a foundation of fantasy, on the belief that invisible vigilantes will punish us if we’re bad and the confidence fairy will reward us if we’re good. And real-world policy — policy that will blight the lives of millions of working families — is being built on that foundation.
http://www.nytimes.com/2010/07/02/opinion/02krugman.html?_r=2&ref=opinion
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