PAUL KRUGMAN-Where The Debt Is Coming From

PAUL KRUGMAN


May 3, 2010, 9:38 AM

Where The Debt Is Coming From

One of the small side benefits of the economic crisis has been that the IMF’sWorld Economic Outlook, all too often a somnolent document, has latterly become must-read and really interesting. (Of, course, it’s not just circumstances; Olivier Blanchard, the Fund’s chief economist, has been doing a fine job).

The latest edition isn’t quite as pathbreaking as the last two, but still has a lot of interesting stuff. One thing it does it break down the sources of the actual and projected rise in advanced-country debt due to the crisis, measured as a percentage of GDP:

International Monetary Fund

What’s striking here is that fiscal stimulus is a small player. It would be even smaller if one took into account the fact that stimulus has made economies stronger than they would otherwise have been, leading to higher revenues and smaller unemployment benefits.

What dominates the picture instead is the consequences of the slump, in falling revenues and higher social insurance payments.

And what this tells us is that anyone demanding that countries not run such big deficits is, in effect, calling for higher taxes and slashed spending in the face of a deep recession — Hoovernomics. Is that really what they want? Is that their final answer?

http://krugman.blogs.nytimes.com/

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May 3, 2010

Gulf Oil Spill Is Bad, but How Bad?

By JOHN M. BRODER and TOM ZELLER Jr.

WASHINGTON — The oil spill in the Gulf of Mexico is bad — no one would dispute it. But just how bad?

Some experts have been quick to predict apocalypse, painting grim pictures of 1,000 miles of irreplaceable wetlands and beaches at risk, fisheries damaged for seasons, fragile species wiped out and a region and an industry economically crippled for years.

President Obama has called the spill “a potentially unprecedented environmental disaster.” And some scientists have suggested that the oil might hitch a ride on the loop current in the gulf, bringing havoc to the Atlantic Coast.

Yet the Deepwater Horizon blowout is not unprecedented, nor is it yet among the worst oil accidents in history. And its ultimate impact will depend on a long list of interlinked variables, including the weather, ocean currents, the properties of the oil involved and the success or failure of the frantic efforts to stanch the flow and remediate its effects.

As one expert put it, this is the first inning of a nine-inning game. No one knows the final score.

The ruptured well, currently pouring an estimated 210,000 gallons of oil a day into the gulf, could flow for years and still not begin to approach the 36 billion gallons of oil spilled by retreating Iraqi forces when they left Kuwait in 1991. It is not yet close to the magnitude of the Ixtoc I blowout in the Bay of Campeche in Mexico in 1979, which spilled an estimated 140 million gallons of crude before the gusher could be stopped.

And it will have to get much worse before it approaches the impact of the Exxon Valdez accident of 1989, which contaminated 1,300 miles of largely untouched shoreline and killed tens of thousands of seabirds, otters and seals along with 250 eagles and 22 killer whales.

No one, not even the oil industry’s most fervent apologists, is making light of this accident. The contaminated area of the gulf continues to spread, and oil has been found in some of the fragile marshes at the tip of Louisiana. The beaches and coral reefs of the Florida Keys could be hit if the slick is captured by the gulf’s clockwise loop current.

But on Monday, the wind was pushing the slick in the opposite direction, away from the current. The worst effects of the spill have yet to be felt. And if efforts to contain the oil are even partly successful and the weather cooperates, the worst could be avoided.

“Right now what people are fearing has not materialized,” said Edward B. Overton, professor emeritus of environmental science at Louisiana State University and an expert on oil spills. “People have the idea of an Exxon Valdez, with a gunky, smelly black tide looming over the horizon waiting to wash ashore. I do not anticipate this will happen down here unless things get a lot worse.”

Dr. Overton said he was hopeful that efforts by BP to place containment structures over the leaking parts of the well will succeed, although he said it was a difficult task that could actually make things worse by damaging undersea pipes.

Other experts said that while the potential for catastrophe remained, there were reasons to remain guardedly optimistic.

“The sky is not falling,” said Quenton R. Dokken, a marine biologist and the executive director of the Gulf of Mexico Foundation, a conservation group in Corpus Christi, Tex. “We’ve certainly stepped in a hole and we’re going to have to work ourselves out of it, but it isn’t the end of the Gulf of Mexico.”

Engineers said the type of oil pouring out is lighter than the heavy crude spilled by the Exxon Valdez, evaporates more quickly and is easier to burn. It also appears to respond to the use of dispersants, which break up globs of oil and help them sink. The oil is still capable of significant damage, particularly when it is churned up with water and forms a sort of mousse that floats and can travel long distances.

Jacqueline Savitz, a senior scientist at Oceana, a nonprofit environmental group, said that much of the damage was already taking place far offshore and out of sight of surveillance aircraft and research vessels.

“Some people are saying, It hasn’t gotten to shore yet so it’s all good,” she said. “But a lot of animals live in the ocean, and a spill like this becomes bad for marine life as soon as it hits the water. You have endangered sea turtles, the larvae of bluefin tuna, shrimp and crabs and oysters, grouper. A lot of these are already being affected and have been for 10 days. We’re waiting to see how bad it is at the shore, but we may never fully understand the full impacts on ocean life.”

The economic impact is as uncertain as the environmental damage. With several million gallons of medium crude in the water already, some experts are predicting wide economic harm. Experts at the Harte Research Institute for Gulf of Mexico Studies in Corpus Christi, for example, estimated that as much as $1.6 billion of annual economic activity and services — including effects on tourism, fishing and even less tangible services like the storm protection provided by wetlands — could be at risk.

“And that’s really only the tip of the iceberg,” said David Yoskowitz, who holds the endowed chair for socioeconomics at the institute. “It’s still early in the game, and there’s a lot of potential downstream impacts, a lot of multiplier impacts.”

But much of this damage could be avoided if the various tactics employed by BP and government technicians pay off in the coming days. The winds are dying down and the seas are calming, allowing for renewed skimming operations and possible new controlled burns of oil on the surface. BP technicians are trying to inject dispersants deep below the surface, which could reduce the impact on aquatic life. Winds and currents could move the globs of emulsified oil away from coastal shellfish breeding grounds.

The gulf is not a pristine environment and has survived both chronic and acute pollution problems before. Thousands of gallons of oil flow into the gulf from natural undersea well seeps every day, engineers say, and the scores of refineries and chemical plants that line the shore from Mexico to Mississippi pour untold volumes of pollutants into the water.

After the Ixtoc spill 31 years ago, the second-largest oil release in history, the gulf rebounded. Within three years, there was little visible trace of the spill off the Mexican coast, which was compounded by a tanker accident in the gulf a few months later that released 2.6 million additional gallons, experts said.

“The gulf is tremendously resilient,” said Dr. Dokken, the marine biologist. “But we’ve always got to ask ourselves how long can we keep heaping these insults on the gulf and having it bounce back. As a scientist, I have to say I just don’t know.”

Leslie Kaufman contributed reporting from New Orleans.

2010 Gulf of Mexico Oil Spill-under the sea

Surface area of Gulf of Mexico oil spill has tripled

Expert: Surface area of Gulf of Mexico oil spill has tripled

By The Associated Press

May 01, 2010, 3:05PM

The surface area of a catastrophic Gulf of Mexico oil spillquickly tripled in size amid growing fears among experts that the slick could become vastly more devastating than it seemed just two days ago.

Frustrated fishermen eager to help contain the spill from a ruptured underwater well had to keep their boats idle Saturday as another day of rough seas kept crews away from the slick, and President Barack Obama planned a Sunday trip to the Gulf Coast.

Documents also emerged showing BP PLC downplayed the possibility of a catastrophic accident at the offshore rig that exploded. BP operated the rig, which was owned by Transocean Ltd.

How far the spill will reach is unknown, but the sheen already has reached into precious shoreline habitat and remains unstopped, raising fears that the ruptured well could be pouring more oil into the gulf than estimated.

The Coast Guard has estimated that about 200,000 gallons of oil are spewing out each day -- which would mean 1.6 million gallons of oil have spilled since the April 20 explosion that killed 11 workers. The environmental mess could eclipse the Exxon Valdez disaster, when an oil tanker spilled 11 million gallons off Alaska's shores in 1989.

The slick nearly tripled in just a day or so, growing from a spill the size of Rhode Island to something closer to the size of Puerto Rico, according to images collected from mostly European satellites and analyzed by the University of Miami.

On Thursday, the size of the slick was about 1,150 square miles, but by Friday's end it was in the range of 3,850 square miles, said Hans Graber, executive director of the university's Center for Southeastern Tropical Advanced Remote Sensing. That suggests the oil has started spilling from the well more quickly, Graber said.

"The spill and the spreading is getting so much faster and expanding much quicker than they estimated," Graber told The Associated Press on Saturday.

Louisiana State University professor Ed Overton, who heads a federal chemical hazard assessment team for oil spills, cautioned that the satellite imagery could be deceiving.

He said satellites can't measure the thickness of the sheen and makes it difficult to judge how much oil is on the water.

Another issue is that the oil slicks are not one giant uniform spill the size of an island. Instead, they are "little globs of oil in an area of big water," Overton said.

Experts also cautioned that if the spill continues growing unchecked, sea currents could suck the sheen down past the Florida Keys and then up the Eastern Seaboard.

The Florida Keys are home to the only living coral barrier reef in North America, and the third largest coral barrier reef in the world. About 84 percent of the nation's coral reefs are located in Florida, where hundreds of marine species live, breed and spawn.

"If it gets into the Keys, that would be devastating," said Duke University biologist Larry Crowder.

Ian R. MacDonald, an oceanography professor at Florida State University, said his examination of Coast Guard charts and satellite images indicated that 8 million to 9 million gallons had already spilled by April 28.

Alabama's governor said his state was preparing for a worst-case scenario of 150,000 barrels, or more than 6 million gallons per day. At that rate the spill would amount to a Valdez-sized spill every two days, and the situation could last for months.

"I hope they can cap this and we talk about 'remember back when,'" Gov. Bob Riley said late Friday, "but we are taking that worst-case and building barriers against it."

However, officials with the Coast Guard brushed off such fears and said the estimates were imprecise.

BP suggested in a 2009 exploration plan and environmental impact analysis for the well that an accident leading to a giant crude oil spill -- and serious damage to beaches, fish and mammals -- was unlikely, or virtually impossible.

The plan for the Deepwater Horizon well, filed with the federal Minerals Management Service, said repeatedly that it was "unlikely that an accidental surface or subsurface oil spill would occur from the proposed activities."

The company conceded a spill would impact beaches, wildlife refuges and wilderness areas, but argued that "due to the distance to shore (48 miles) and the response capabilities that would be implemented, no significant adverse impacts are expected."

The spill -- a slick more than 130 miles long and 70 miles wide -- threatens hundreds of species of wildlife, including birds, dolphins, and the fish, shrimp, oysters and crabs that make the Gulf Coast one of the nation's most abundant sources of seafood.

Although the cause of the explosion was under investigation, many of the more than two dozen lawsuits filed in the wake of the explosion claim it was caused when workers for oil services contractor Halliburton Inc. improperly capped the well -- a process known as cementing. Halliburton denied it.

The Coast Guard said Saturday it had shut down two offshore platforms and evacuated one of them near the spill as a safety precaution.

A sheen of oil from the edges of the slick was washing up at Venice, La., and other extreme southeastern portions of Louisiana. Animal rescue operations ramped up as crews found the first oiled bird offshore.

Several miles out, the normally blue-green gulf waters were dotted with sticky, pea- to quarter-sized brown beads the consistency of tar. High seas were forecast through Sunday and could push oil deep into the inlets, ponds, creeks and lakes that line the boot of southeastern Louisiana. With the wind blowing from the south, the mess could reach the Mississippi, Alabama and Florida coasts by Monday.

Amid increased fingerpointing, the government desperately cast about for new ideas for dealing with the growing environmental crisis. Obama halted any new offshore drilling projects unless rigs have new safeguards to prevent another disaster.

Officials have said stemming the flow of oil is their top priority, but the seas have been too rough and the winds too strong to burn off the oil, suck it up effectively with skimmer vessels, or hold it in check with the miles of orange and yellow inflatable booms strung along the coast.

The floating barriers broke loose in the choppy water, and waves sent oily water lapping over them.

BP also sought ideas from some of its rivals and was using at least one of them Friday -- applying chemicals underwater to break up the oil before it reaches the surface. That had never before been attempted at such depths.

BP and federal authorities said the dispersant was released overnight at the site of the leak, nearly 5,000 feet underwater, and they were evaluating the effort Saturday.

Many of the oil-cleaning boats remained tied to the docks Saturday in Venice, partly because of the weather. However, charter boat captain Eddie Cerise said he was just awaiting instructions from BP so he could help with containment.

He said he attended a safety class, though he had hoped for more practical information -- like what to do if oil gets into his boat -- than what he was taught.

"Basically they say if you walk up on an alligator, don't kick it, if you see something you don't recognize, don't do it," he said.

The weather also was keeping skimmers and other larger vessels stuck in harbor, said Coast Guard Petty Officer 1st Class David Mosley, a spokesman for a command center in Robert, La.

"Waves are going anywhere from 5 feet to 8 feet high and getting bigger," he said. "It definitely makes it more difficult."

2010 Gulf of Mexico Oil Spill-Offshore fishing is closed

Offshore fishing in Gulf of Mexico oil spill area is closed

By Bob Marshall, The Times-Picayune

May 02, 2010, 4:00PM

By Bob Marshall, The Times-Picayune

May 02, 2010, 4:00PM

The federal government Sunday announced a 10-day closure of fishing in a section of the Gulf of Mexico affected by the Deepwater Horizonoil spill in the Gulf of Mexico while it monitors possible contamination of fish and other seafood. However, the agency said no contamination had yet been found. 

The order comes after inshore closures imposed Saturday by Louisiana and affects a huge swath of the northern Gulf from the mouth of the Mississippi east to Pensacola, Fla.

The closure will be another blow to the Gulf shrimp fleet, already restricted from the east side of the Mississippi River delta, one of the most productive shrimping areas in the nation.

Jane Lubchenco, NOAA administrator, who met with more than 100 fishers in Venice on Friday night, said the agency is trying to balance the economic interests of the fishing industry with health concerns.

BP's Gulf of Mexico oil spill: the crude facts of an oil disaster

BP's Gulf of Mexico oil spill: the crude facts of an oil disaster

BP's belching oil well in the Gulf of Mexico comes at the worst possible time and place. Its effect will be devastating, says Geoffrey Lean.

By Geoffrey Lean
Published: 9:44AM BST 04 May 2010

Ablaze: A fleet of tugs attempt to extinguish the fire on the sinking oil rig Deepwater Horizon, off Louisiana

Yesterday was supposed to be a day of green glory – rather than sticky black torment – for BP. For the company behind what may prove to be the world's worst-ever oil slick was expected to receive an award for "outstanding safety and pollution prevention performance" in its offshore operations, at a lunchtime ceremony in Houston. Instead it spent the day desperately trying to stop the oil that was gushing out of its deep underwater well from devastating the ecology and economy of America's gulf states – and attempting to defend its reputation against almost universal excoriation.

BP Exploration and Production Inc was one of three shortlisted companies (one of the others was ExxonMobil, famed for the 1989 Alaska Exxon Valdez spill, until now America's worst) for the US Government's Safety Award for Excellence, due to be presented at the Offshore Technology Conference. This would have been almost exactly three years after the oil giant's newly installed chief executive, Tony Hayward, pledged to "focus like a laser on safe and reliable operations"

Yesterday a humbled Mr Hayward was in the neighbouring state of Louisiana, confessing that the company was preparing for a "worst case scenario". It is as well that it is, for the consequences of the blow-out at its well under the Deepwater Horizon rig, some 48 miles out in the Gulf of Mexico from the mouth of the Mississippi, could dwarf the devastation wreaked 21 years ago across the country in Alaska's Prince William Sound.

Experts are warning that the rate at which the oil is pouring out from the mile-deep well could soon increase 10-fold, that one of the world's richest fisheries could be ruined for years, that Louisiana's vital wetlands could be destroyed, and that the slick could even work its way around the Florida peninsula to blacken its way up the American East Coast.

"Worst case scenarios almost never happen," Professor Robert Thomas, of New Orleans' Loyola University, was quoted as saying yesterday. "In this case, almost everyone I have known with technical knowledge of oil spills – people who have worked in the industry 30, 40 years – say it is upon us." Others talk of a "Gulf Coast Chernobyl".

Its not the size of oil spills that matters most, but when and where they happen. The one from the Exxon Valdez does not even rank among the world's 30 biggest, but it spread through one of America's richest and most fragile natural habitats. This one – though it has yet to equal the numbers of gallons spilt in Alaska – is already looking even worse.

It, too, has happened in a particularly important and vulnerable area, and the winds have blown it with unerring accuracy towards the most sensitive spot of all, at the worst possible time of year. Nearly three-quarters of all US waterfowl – and all its 110 species of migratory neotropical songbirds – use Louisiana's three million acres of wetlands to rest or nest.

During these very two weeks, 25 million songbirds can cross the Gulf each day, mostly making their first landfall in the wetlands. Worse, this is the most vital season for the Gulf's fisheries, which also largely depend on them. Oysters have just started to reproduce, speckled brown trout have started spawning, shrimp have just begun to grow, to name but a few. Nine out of 10 of all the region's marine species rely on wetlands at some point in their life cycle, and these are mainly in Louisiana.

The state produces more fish and seafood than anywhere in the US, outside Alaska. On Sunday its government banned fishing in the areas affected by the slick, and no one knows when it will resume. Some local shrimpers are gloomily predicting that it will be seven years before they can set to sea again; others that they will be out of business long before then. "What do we do?" asks 55-year-old Bernel Prout in the fishing community of Venice. "Go on welfare, I guess. Food stamps."

And there is an even worse prospect – that the wetlands, 40 per cent of the US total, may perish altogether if the slick gets really big. Already, as Professor Denise Reid, of the University of New Orleans, puts it: "They are hanging by a fingernail." Some 24 square miles of them are lost every year, deprived of sediment by engineering works upstream, cut up by oil companies, eroded by the wakes of boats, and poisoned by agricultural pesticides. Recent hurricanes, including Katrina, have also swept large chunks away.

The concern now is that grasses that hold the whole system together could be smothered by the oil and die: without them all that would remain is mud, to be washed away within a year. And the wetlands are not just vital for fish and fowl, but provide a vital buffer against storms and hurricanes: if they had been healthier, it is accepted, Katrina would probably have been less damaging.

It would take a lot more oil than is now in the water to kill all the grasses, but it could be on its way. No one knows exactly how much has so far flooded out from the deep well – though estimates are increasing all the time – but we may have seen nothing yet. Experts are worried that it is only being held up by kinks in the crumpled pipe that used to bring it to the surface. A confidential, leaked report from the US Government's National Oceanic and Atmospheric Administration warns that "if the pipe deteriorates further, the flow could become unchecked", growing 10 times greater.

"We will fix this," Mr Hayward promised – but no one has ever before attempted such a task. The pollution is coming not from a wrecked tanker, with a finite amount in its hold, but from a belching underwater oil volcano, with a vast reservoir to drain, at depths where the water pressures are so great that no diver could operate. BP first tried robotic submarines, but without success – even though they have arms and controls so precise that, as one expert put it, "they could give you three stitches on your forehead".

Another plan is to drill a new well, but that could take three months. So BP is concentrating on constructing huge steel boxes to drop over the leaks. Such measures succeeded in stopping leaks in shallow waters after Katrina, but have not been tried at depth.

Once out, the type of oil involved is hard to clean up. Deceptively named "sweet crude", it is particularly nasty stuff, thick and full of chemicals that do not degrade easily. It is hard to burn off or disperse – and does not easily evaporate. Once on land it would cover everything in a sticky goo and be hard to clean up. Oil from the Exxon Valdez is still around more than 20 years later and that washed onto stony shores, which are much less vulnerable than Louisiana's mud and grasses.

Yesterday's award ceremony was hastily cancelled and already the accusations against BP are coming in from all levels – from President Obama to local people, viciously hit again even as they recover from Hurricane Katrina. The company was too slow to act, and underestimated the seriousness of the disaster, the recriminations say. And they point to how BP lobbied vigorously against stricter safety measures, insisting that a disaster like this could never happen and that, even if it did, "no significant adverse impacts" could be expected because it would respond so well.

It will, one suspects, be many years – longer even than it takes for the local economy and ecology to recover – before BP ever again is close to getting its hands on an award for preventing pollution at sea.