Oily Sleazy Talk*

Dean has aptly commented on Obama's political problems that are represented by the Gulf oil spill, riffing off more insight from Peggy Noonan. I agree with Dean that even if one gives Obama the benefit of the doubt,

The reality of the situation now is, we will wake up tomorrow with a 10% unemployment rate, a crappy economy, pending nanny-state legislation with higher taxes and anti-growth consequences and still the very real possibility of an evolving, years-long ecological and economic meltdown in the Gulf.

I agree, and have a hard time not gloating over the crap sandwich that looks very much like the Katrina sandwich served up to George Bush. But I also want to point out something else brought out by Noonan:

His philosophy is that it is appropriate for the federal government to occupy a more burly, significant and powerful place in America—confronting its problems of need, injustice, inequality. But in a way, and inevitably, this is always boiled down to a promise: "Trust us here in Washington, we will prove worthy of your trust." Then the oil spill came and government could not do the job, could not meet the need, in fact seemed faraway and incapable: "We pay so much for the government and it can't cap an undersea oil well!"

This is one of the reasons I haven't piled on Obama over the spill. In fact, the federal government, by its nature is not really capable of preventing and responding to every disaster that might befall us. If we excoriate Obama for failing to prevent this, or failing to respond appropriately, aren't we saying that we believe that disaster prevention is the province of the federal government? Now in this particular case, the regulators in the Lake Charles, LA office seemed to have cozy relationships with the regulated:

Employees of a federal agency that regulates offshore drilling—including some whose duties included inspecting offshore oil rigs—accepted sporting-event tickets, meals, and other gifts from oil and natural-gas companies and used government computers to view pornography, according to a new report by the Interior Department's inspector general.

The report—published Tuesday on the inspector general's website—describes a culture in which inspectors assigned to the Lake Charles, La., office of the Minerals Management Service have moved with "ease" between jobs in industry and government, drawing on relationships that formed "well before they took their jobs" with the agency.

This is typical of government attempts to regulate industry. As industry becomes more complex, it is difficult to find those with the ability to perform adequate technical oversight without drawing on the industry it is regulating. This is known as regulatory capture, and happens frequently, as W.C. would point out in the banking industry. Another consequence of regulatory capture is that it creates a false sense of security and a dilution of responsibility. In this case, one might ask, who is responsible for the mistakes or poor practices that led to this disaster? Doesn't the federal government bear some portion of the blame for failing to regulate? If not, why are we regulating at all?

What is the solution? I think that we have to be clear in tort law that BP would be fully responsible financially for the environmental damage they might cause. Might this bankrupt them? Perhaps, but it provides a better incentive than lax regulation.

Meanwhile, graft, oil and sleaze mixing in the Big Easy? Who knew?

*Reference for the title comes from one of my favorite MST3K episodes of all time.