Additional Thoughts on Ryan’s Question (Below)

Fellow Hayride contributor Ryan Booth has posed an interesting though controversial question, Is the Spill Good for LA’s Economy?  The question bears further scrutiny.


There will certainly be short term economic gains for the state, for as Ryan notes, we can anticipate significant spending by BP to mitigate losses suffered by state residents whose livelihood has been significantly, and probably permanently, altered.  From those who troll coastal waters for fish and shellfish to those who prepare and serve it to, perhaps, a reduced volume of tourists, reduced income streams are already taking a toll that BP will in some manner be expected to address.  BP is already spending an almost unimaginable sum of money attempting to stop the leak – payroll for an influx of workers directly involved, fees for equipment to address the leak as well as to drill relief wells, and payroll and equipment fees to address coastal protection and surface collection of the spill.  Unfortunately, it appears that the only end that offers any assurance of success is the completion of relief wells in August, and that BP’s money will continue to flow with an intensity of the leak that prompts it.


As Ryan also notes, we can expect an influx of federal aid, both to address certain issues BP is addressing, and to address coastal cleanup.  That aid will come from taxation nationwide, or more likely it will come as a result of yet more deficit spending.  Will that be good for Louisiana’s, or the nations, economy?  If you subscribe to Keynesian economic theory, it will be.  If you examine the effects of recent deficit spending worldwide, then not so much.


Federal aid will surely flow to academia to study ways to restore the coast, to mitigate any damage caused by the oil and the dispersants used to minimize the immediate damage, and to study better ways to safely produce oil in deep waters.  Will that aid flow to Louisiana universities and thus help the state, or will it flow to Ivy League universities favored by our governing elite?  A research grant to Columbia or MIT will not in any way address the funding reductions Louisiana’s schools are suffering.


The spill has already resulted in a ban of offshore exploration.  How can that possibly be good for an economy so heavily dependent on oil exploration and production?  How many direct and upstream jobs will be lost?  What will be the effect on a state budget so dependent on royalties from oil from state holdings selling for a minimum of $80 per barrel? Only by transferring those jobs to shallow water and land based exploration is there much hope of reducing the devastation on our economy.


This disaster in the Gulf is encouraging our federal government to rally behind its ideology of green jobs and renewable energy sources.  The likelihood of its encouraging oil exploration on land and in shallow waters is virtually non-existent.  The jobs and the revenue this state needs in order to prosper appear to be evaporating.  While the magnitude of this disaster grew, our president was in California touring federally funded solar panel manufacturing plants and attending fundraising events for ideologically like-minded senatorial candidates.  The spill plays so well into the hands of such ideologies that we’ve wondered if his initial indifference regarding it was intentional – let the environment be damaged at BP’s expense, and that of the coastal states, in order to further the message that the future depends on renewable energy.  How else can one explain the highly viscous response of federal authorities?


While we believe the president made the right decision in leaving BP and the industry in charge of gaining control of the leaking well, his response to the threat to coastal barrier islands, marshes and beaches, and the wildlife on land and at sea, was one of indifference.  One of the reasons the federal government exists is to provide the resources and leadership in the face of such disasters, but he did not govern.  Rather, he “politicked.”  While rival production companies unselfishly offered services and expertise to seal the well, our federal leadership enacted hearings to determine where to place blame, examined the environmental impact of man-made sand islands to protect the coast from an obvious environmental crisis, and sang the praises of wind and solar energy that can’t compete in the market without being subsidized via heavy taxation on the very industry they seek to replace.


(Frequent readers will recall that we have examined the true economics of wind and solar energy, in Spain, Germany and Denmark, where they have failed dramatically and their subsidies are being reduced.  New visitors can visit here and follow the embedded links.)


An influx of cash from BP and the federal government will undoubtedly help offset, or at least minimize, the impact of this catastrophic spill on Louisiana’s economy.  But the only way that the long term effects can be mitigated are if the spill opens the eyes of the electorate to the destructive ideologies of our sitting government such that a more responsible and responsive government replaces it.



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