Exxon Valdez Oil Spill

The Supreme Court is reviewing a lower court ruling awarding $2.5 billion in punitive damages for a 1989 oil spill occurring in Prince William Sound, Alaska. Exxon argues that it should not be liable for the negligence of the oil tanker’s skipper. The award would be peanuts for Exxon who saw a $39.5 billion profit in 2007. It would mean a lot to thousands of commercial fishermen, seafood processors, and native Alaskans whose livelihood has been damaged. Why should a rich corporation be able to tie up the case for 19 years? Where is justice?

Land Use & Development Rights

Under the banner of protecting property rights, a number of states have passed laws requiring compensation if land use regulations lower owners' property value. This slogan ignores the fact that regulation of one person's property often increases the value of neighboring property including public interests in the environment. For example, a regulation restricting building on coastal shorelines may prevent some owner from putting up an intensive development and thereby make his parcel less valuable, but it may protect the shoreline from erosion and losses to other owners. The issue is which owners count.
The voters of Oregon passed a 2004 law allowing owners to seek compensation if state and local regulations reduced their property values. Voters probably had in mind individuals who wanted to build a house on their property, but it was widely used for large housing projects, strip malls, and landfills.
The voters thought again, and in Novemeber, 2007, approved a law preserving a landowner's right to build homes, but curbs large commercial and industrial development. A coalition of farmers, business groups, and conservation groups such as the Nature Conservancy spent $4.5 million to support the new law. These coalitions are hard to put together as many are tempted to be free riders, as the results of the campaign are available to all whether or not they have contributed (a high exclusion cost good).
Source: Nature Conservancy, Spring, 2008.

CEO Remuneration: Too Much

The pattern of CEO failures being rewarded with huge severance packages is repeated over and over again. The latest is insurance broker Marsh & McLennan who fired its CEO after the company shares lost over a fifth of their value last year. Still he received $7.15 million in severance. The evidence is contrary to the argument that executive talent is so rare that it must be promised a golden parachute to accept new employment.
Yahoo’s CEO received $429 million in stock option profits over his first four years at the helm and a $71 million paycheck in his fifth year. In 2007 he was fired for poor performance.
These absurd rewards for failure are in sharp contrast to the payouts to workers left behind. Mitt Romney’s Bain Capital bought a Tiffin, Ohio, plant and closed it last December denying workers any severance or medical coverage. Bain on the other hand, made $51 million on the deal. The cooperation of the CEO no doubt earned him a tidy sum.
Gardner and Means years ago noted the separation of ownership and management in the modern corporation. They would be shocked to see how it has turned out as boards of directors (many of which are corporate CEOs in other companies) take care of their own at stockholders and employees expense.
Source: Too Much: A Commentary on Excess & Inequality--http://www.cipa-apex.org/toomuch/index.html

Ceremonial Protection Against Terrorism

Amtrak announced that it will begin random inspection of passenger baggage. This does not make me feel safer. Why do officials think that future acts of terrorism will take the same form as in the past--namely related to transportation? There are innumerable places where terrorists can place explosives,and even an army could not cover them all. Let us admit that since the invention of the gun, we are all conditionally safe, and we all exist on the good will of our fellows. We should invest in creating good will rather than putting all of our resources into surveillance. Much of so-called Homeland Security is just ceremonialism and no more effective than any other fetish.

Sub-Prime Mortgage Crisis Spreads

The Michigan Higher Education Student Loan Authority has suspended MI-LOAN after collapse of its auction-rate securities. These securities were used to obtain a lower interest rate for long term loans. Unfortunately, the securities contained a penalty clause that if the auction fails, the interest rate jumps. The auctions were not supposed to fail, but because of contagion in financial markets caused by failures in the sub-prime mortgage market, the auction-rate securities market has collapsed. According to Paul Krugman of the New York Times, The Port Authority of New York using the same kind of auction-rate securities “saw the interest rate it pays leap from 4.3 percent to 20 percent.”

Catch-22

The US Supreme Court refused to review a case brought by the ACLU concerning warrantless surveillance. A U.S. appeals court based in Cincinnati earlier had dismissed the case because the plaintiffs could not state with certainty they had been wiretapped by the government's National Security Agency. Of course, the list of those under surveillance is secret!

Crisis of Faith in Financial System

The Michigan Higher Education Student Loan Authority has suspeneded a major student-loan-program after collapse of its auction-rate securities. These securities were used to obtain a lower interest rate for long term loans. Unfortunately, the securities contained a penalty clause that if the auction fails, the interest rate jumps. The auctions were not supposed to fail, but because of contagion in financial markets caused by failures in the sub-prime mortgage market, the auction-rate securities market has collapsed. According to Paul Krugman of the New York Times, The Port Authority of New York "saw the interest rate it pays leap from 4.3 percent to 20 percent."

Disaster Capitalism

In the 19 months following Hurricane Katrina, New Orleans’ public schools had been replaced with privately run charter schools paid for with public vouchers. The union contracts of teachers were canceled. In her book entitled, Shock Doctrine, Naomi Klein details the “orchestrated raids on the public sphere in the wake of catastrophic events,” thus her term “disaster capitalism.” She sees a pattern in how the Bush administration used 9/11 as an excuse to bomb Iraq. She might have added the attempt to create an impression of a crisis of the Social Security system to replace it with a private alternative, and the weak economy to promote extension of tax cuts for the rich. These people can no longer be called “conservatives,” they are radicals.

Fiscal Stimulus

A fiscal stimulus to the present weak economy is a good idea. To finance it with a projected $168 billion addition to the deficit over two years is not. Interest on the public debt is already consuming a huge portion of the Federal budget. There is an alternative. When an economy is not performing anywhere close to its capacity, there is no need to have part of the economy save (and make loans/buy government bonds) in order to put other parts of the economy to work. If our banking laws enable banks to create money by making loans, the government can enable the U.S. Treasury to do the same. When private business is discouraged by inadequate aggregate demand, they do not want to borrow to make new investments, leaving many human and plant resources unused. Government loans to citizens without any interest or repayment obligation can replace bank loans to business to sustain aggregate demand.