Kautzman’s AP GO PO Blog

Exxon asks justices to overturn, reduce $2.5 billion damages

Plaintiff attorney Jeffrey L. Fisher speaks with the media after addressing the Supreme Court in the Exxon Valdez case. Associated Press (Associated Press )

David G. Savage
Los Angeles Times
February 28, 2008

WASHINGTON – Nearly 19 years after the Exxon Valdez oil spill fouled Alaska’s Prince William Sound, the Supreme Court debated Wednesday whether the world’s largest oil company must pay a record $2.5 billion in punitive damages.

The eight justices who heard the case appeared closely split, although several said they were looking for a way to reduce the size of the award. Justice Samuel Alito sat out the case because he is an Exxon stockholder. His stock holdings could prove costly to the company, since a tie vote would have the effect of affirming the $2.5 billion verdict.

No one disputed that the oil spill was an extraordinary disaster. The company’s lawyer began by describing it as “one of the worst environmental tragedies in U.S. maritime history.”

And no one disputed that Exxon was responsible for paying for the cleanup and for the losses suffered by fishermen, cannery workers and other Alaska residents. Exxon paid $900 million in cleanup costs, and a jury ordered it to pay $287 million to 32,000 Alaskans, many of whom lost their livelihoods when the fishing industry was destroyed.

At issue Wednesday was whether extra damages were needed to punish Exxon for corporate recklessness.

In 1994, a jury in Alaska imposed $5 billion in punitive damages, money that would go to the plaintiffs. Years of appeals followed, and the verdict was cut to $2.5 billion.

During this same stretch, the Supreme Court has been putting limits on punitive damages, believing the amount should be tied to the actual harm.

The case heard Wednesday is unusual because it apparently was the first before the Supreme Court involving punitive damages for an accident on the high seas.

Maritime law has shielded ship owners from being punished for damage caused by their vessels. This made sense during the era of sailing ships, said Justice David Souter. “In those days, when a ship put to sea, the ship was sort of a floating world by itself,” he said. It was gone and out of its owner’s control until months, or perhaps years, later when it returned to port.

Representing Exxon, Washington lawyer Walter Dellinger cited this principle of maritime law and urged the court to throw out the entire punitive verdict. He cited the case of the Amiable Nancy in 1818 as having a historic precedent shielding ship owners.

But his argument quickly ran aground. “It’s rather, I think, an exaggeration to call it a long line of settled decisions in maritime law,” Justice Ruth Bader Ginsburg said.

As a fallback, Dellinger argued that the $2.5 billion verdict was too high. He cited several federal laws that, for example, fine those who pollute the environment. Typically, these legal fines may total millions of dollars but not billions, he said.

He also urged the justices to keep in mind that it was an accident. “This was not an intentional act. It was not malicious. The company did not make one dollar of profit,” he said.

But Stanford law professor Jeffrey L. Fisher, representing the workers, said Exxon deserved to be punished for “putting a drunken master in charge of a supertanker.”

He said the jury heard testimony that Exxon officials knew Capt. Joseph Hazelwood was an alcoholic, and they had 33 reports that he had gone back to drinking. “Up and down the corporation, for three years, upper management was receiving reports that this man was drinking aboard the vessel,” Fisher said.

On March 24, 1989, Hazelwood had been drinking and left the bridge of the supertanker. The third mate left in charge failed to turn the giant ship in time, and it hit Bligh Reef. About 11 million gallons of crude oil were spilled.

Fisher said the captain was an agent of Exxon’s management. “It is perfectly appropriate to expose the corporation to punitive damages based on the reckless acts of such an individual,” he said.

Chief Justice John Roberts and Justice Antonin Scalia questioned why a corporation should be punished if one of its officials violates its corporate policy. Exxon had a firm policy against drinking.

Three other justices – Anthony M. Kennedy, Stephen G. Breyer and Souter – said they saw a need to reduce the punitive damages.

“This is a very dramatic accident … but there are accidents every day,” Breyer said. He questioned whether “negligence or recklessness is now going to be not only imputed to the corporation but subject (to) punitives. … It will be a new world for the shipping industry.”

Economist’s calculation subject of congressional hearing today

Kevin G. Hall
McClatchy
February 28, 2008

WASHINGTON – When U.S. troops invaded Iraq in March 2003, the Bush administration predicted that the war would be self-financing and rebuilding the nation would cost less than $2 billion.

Coming up on the five-year anniversary of the invasion, a new estimate from a Nobel laureate puts the cost of the wars in Iraq and Afghanistan at more than $3 trillion.

That estimate from Noble Prize-winning economist Joseph Stiglitz also serves as the title of his new book, “The Three Trillion Dollar War,” which hits store shelves Friday.

The book, co-authored with Harvard University professor Linda Bilmes, builds on previous research published in January 2006. The two argued then and now that the cost to America of the wars in Iraq and Afghanistan is wildly underestimated.

When other factors are added – such as interest on debt, future borrowing for war expenses, continued military presence in Iraq and lifetime health care and counseling for veterans – they think that the wars’ costs range from $5 trillion to $7 trillion.

“I think we really have learned that the long-term costs of taking care of the wounded and injured in this war and the long-term costs of rebuilding the military to its previous strength is going to far eclipse the cost of waging this war,” Bilmes said in an interview.

The book and its estimates are the subject of a hearing today by the Joint Economic Committee of Congress.

The White House doesn’t care for the estimates by Stiglitz, a former chief economist of the World Bank who’s now a professor at Columbia University.

“People like Joe Stiglitz lack the courage to consider the cost of doing nothing and the cost of failure. One can’t even begin to put a price tag on the cost to this nation of the attacks of 9/11,” said White House spokesman Tony Fratto, conceding that the costs of the war on terrorism are high while questioning the premise of Stiglitz’s research.

“It is also an investment in the future safety and security of Americans and our vital national interests. $3 trillion? What price does Joe Stiglitz put on attacks on the homeland that have already been prevented? Or doesn’t his slide rule work that way?”

Rep. John Murtha, D-Pa., a decorated Marine Corp colonel and Vietnam War veteran, welcomed the effort by Stiglitz and Bilmes to quantify the ways in which the wars will cost taxpayers.

“It’s astounding that here we are about to mark the fifth anniversary of the invasion of Iraq, and this administration still refuses to acknowledge the long-term costs of the war in Iraq,” he said.

By any estimate, the Bush administration’s predictions in March 2003 of a self-financing war have proved wildly inaccurate. Stiglitz cites operational spending to date of $646 billion for the wars in Iraq and Afghanistan, and, working off estimates from the nonpartisan Congressional Budget Office, presumes that spending on these wars over the next decade probably will amount to another $913 billion.

Pentagon officials had no immediate comment on Stiglitz’s book or his estimates.

Stiglitz and Bilmes first estimated war costs of $1 trillion in January 2006. Their research proved controversial and sparked debate about the costs of replacing equipment used by the armed forces and National Guard units. In the new book, they offer a figure of $404 billion for replacing equipment, planes and tanks and bringing military hardware back from Iraq and Afghanistan.

In an interview, Stiglitz said that too much of the public debate had been over the wars’ operational costs while the real budget strains would show up only years from now.

“The peak expenditures are way out,” he said, noting that the peak expenditures for World War II vets came in 1993.

The pair estimated that future medical, disability and Social Security costs for veterans of the conflicts in Iraq and Afghanistan range from a best-case $422 billion to what they call a more probable long-term expense of $717 billion.

It’s why the two call in the book for creating a Veterans Benefits Trust Fund to set aside money in a “lock box” to pay for future health-care needs of Iraq and Afghanistan vets. Although veterans’ health care amounts to a future promise, they said, it isn’t an entitlement and instead is funded through discretionary spending. In the future, funding for vets will compete with other government programs.

“We should not have an unfunded entitlement program like this,” Stiglitz said. “This is more like deferred compensation. … We require corporations to put money away but we don’t require the government to put money away, and we should be doing that … so when the focus turns away to some other problem, veterans aren’t given the shaft.”

February 28, 2008

By Steve Chapman

Democrats often pillory Republicans for their economic errors. From the 1930s on, they reminded Americans of Herbert Hoover’s Great Depression. In 1960, they blamed Dwight Eisenhower for slow growth. In the 1980s, they decried the “trickle-down” policies of Ronald Reagan. And today, they excoriate the damage caused by the North American Free Trade Agreement passed under … Bill Clinton.

Even Hillary Clinton treats the accord with a warmth she normally reserves for Kenneth Starr. She never misses a chance to denounce what she calls “the shortcomings of NAFTA,” or to insist she was always against it. But she has to deal with Barack Obama, who often gives the impression that his opponent’s name is Hillary Nafta Clinton.

So Tuesday’s debate in Cleveland devoted a lot of time to the question: Are you now or have you ever been a supporter of NAFTA? Both candidates denied any complicity, past or present, and both vowed to scrap the treaty if the Mexican government doesn’t agree to changes.

Obama makes a special theme of blaming this and other trade agreements for setting off a race to the bottom that destroys American jobs. “In Youngstown, Ohio,” he said in a Texas debate, “I’ve talked to workers who have seen their plants shipped overseas as a consequence of bad trade deals like NAFTA, literally seeing equipment unbolted from the floors of factories and shipped to China.” Why NAFTA would induce a company to move production to China is a puzzle, but you get the idea.

His campaign claims a million jobs have vanished because of the deal. That sounds devastating, but over the last 14 years, the American economy has added a net total of 25 million jobs — some of them, incidentally, attributable to expanded trade with Mexico. When NAFTA took effect in 1994, the unemployment rate was 6.7 percent. Today it’s 4.9 percent.

But maybe all the jobs we lost were good ones and all the new ones are minimum-wage positions sweeping out abandoned factories? Actually, no. According to data compiled by Harvard economist Robert Z. Lawrence, the average blue-collar worker’s wages and benefits, adjusted for inflation, have risen by 11 percent under NAFTA. Instead of driving pay scales down, it appears to have pulled them up.

Manufacturing employment has declined, but not because we’re producing less: Manufacturing output has not only expanded, but has expanded far faster than it did in the decade before NAFTA. The problem is that as productivity rises, we can make more stuff with fewer people. That’s not a bad thing. In fact, it’s essentially the definition of economic progress.

We’re not the only country facing that phenomenon. China makes everything these days, right? But between 1995 and 2002, it lost 15 million manufacturing jobs.

Even if the candidates don’t want to acknowledge the gains of the last 14 years, it’s hard to see how they can blame NAFTA for economic troubles in Ohio or elsewhere. The whole idea was to eliminate import duties in both the United States and Mexico (as well as Canada). What everyone forgets is that we got the best of that bargain, since our tariffs were very low to begin with.

“Mexico had very good access to the U.S. market” already, says Charlene Barshefsky, who was U.S. Trade Representative in the Clinton administration. “What NAFTA did was level the playing field.”

Critics complain that while exports to Mexico have risen, imports from Mexico have risen even faster. But that’s not because we embraced free trade. It’s because our economy has been more robust than theirs. Prosperous consumers buy more goods, from both home and abroad, than struggling consumers. Absent NAFTA, the trade imbalance with Mexico would not be smaller. It would be bigger.

None of this is a revelation to economists. The candidates’ broadsides require them to ignore not just a wealth of evidence but the overwhelming consensus of experts. Gary Clyde Hufbauer, an economist at the Peterson Institute for International Economics in Washington, estimates that 90 percent of the people in his profession regard the accord as a good thing.

Jagdish Bhagwati, a Columbia University trade economist, supports Obama and thinks his positions on trade are generally better than Clinton’s. “But on NAFTA,” Bhagwati told me, “he is dead wrong.”

Clinton is also in error, but on the question of which candidate has more consistently and vehemently denounced the accord, Obama has opened up a clear lead. Now there’s a race to the bottom.

schapman@tribune.com

Copyright 2008, Creators Syndicate Inc.

John McCain Wants Conservatives by His Side. Fine, They Say, Just Move This Way.
By Kevin Merida
Washington Post Staff Writer
Thursday, February 28, 2008; C01

Chris Pohl came to the recent Conservative Political Action Conference in Washington to peddle hats.

As political gimmicks go, his was rather ingenious: a Russian ushanka, complete with fake-fur ear flaps, stamped with the red Communist hammer and sickle and adorned with interchangeable name tags — Hillary ‘08 or Obama ‘08. Twenty-five bucks.

In the hallways, he handed out red business cards that listed his name only as “Karl” (as in Marx) and set up a booth at which bottles of red-colored lemonade (”Leninade”) were dispensed next to a life-size cardboard cutout of Hillary Clinton herself. Pohl was far down the road of cleverness and — he hoped — economic salvation. “I’m a subprime casualty,” said Pohl, who lost his job at a mortgage company in November. “So now I’m selling hats.”

“Karl” was certainly in the right place to unveil his ushanka: CPAC is the preeminent yearly gathering of conservative activists. Here, they embraced the message of his hats, that electing either Clinton or Barack Obama president would be like installing Vladimir Lenin in the White House. High-fives and chuckles everywhere.

But it occurred to Pohl, in this uneasy way, that the hat was really a general-election prop, and conservatives are not yet ready to start the general election. Their own party’s presumptive nominee, Sen. John McCain of Arizona, is not their kind. Many don’t like him, don’t trust him, hate that he is so cozy with the media, and worry that, once elected, he’ll huddle and compromise with Democrats and give away their store. Too much Straight Talk and not enough street fighter.

“That’s why my hat’s a little ahead of its time,” Pohl lamented.

In the nearly three weeks since McCain himself was both booed and cheered at CPAC, his surrogates and operatives have been making calls and strategic visits, trying to quell the unhappy roar within the GOP’s base. But nothing has worked. In a strange, dumb-luck kind of way, the McCain campaign thought it had gotten a break no one would ever wish for: a New York Times story that raised the possibility of an affair between the senator and an attractive lobbyist drew an immediate backlash from conservatives, who rallied to McCain’s side. But that temporary defense was little more than a respite for the most ardent ideological warriors.

“This assumption that people who defended him are now on board is naive,” said David Keene, chairman of the American Conservative Union, a CPAC co-sponsor. “I think he’s got a ways to go. If he really wants an enthusiastic base in the fall, he is going to have to do more than sit there and hope that it comes to him.”

Keene was one of those on the receiving end of a McCain adviser’s recent phone call. The pitch, as Keene described it: Republican loyalty demands that all wings of the party come together in the interest of retaining the White House. Unconvincing, Keene said.

“Part of the problem he has on the right is directly traceable to the attitudes he has expressed over the years toward conservatives, which has led to a queasy feeling on their part,” Keene continued. “I have seen no real evidence of an attempt to find out what the real differences are and try to bridge the gap. I think they have some appreciation of the problem, but I don’t know if they have a commitment to do anything about it.”

McCain strategist Charlie Black pointed to recent national polls that show his candidate, on average, getting 85 percent of the Republican vote against either prospective Democratic nominee. “We don’t have a huge problem at the voter level,” noted Black. “It only matters what happens in November, and McCain is popular with Republican rank-and-file voters.”

As conservatives see it, here’s the problem right now: In 24 primaries and caucuses, McCain never once carried voters who identified themselves as “very conservative,” according to exit polls. And in a majority of the Republican nominating contests, those voters represented a third or more of the total voter turnout. Similarly, the exit polls show, McCain fared poorly with Republican voters who said the most important quality in a candidate is someone who “shares my values.”

Tony Blankley, who was press secretary to former House speaker Newt Gingrich, wrote pointedly in the conservative publication Human Events: “It would be the first time in living memory that a Republican presidential nomination went to a candidate who was not merely opposed by a majority of the party but was actively despised by about half its rank-and-file voters across the country — and by many, if not most, of its congressional officeholders.”

The case against McCain has a number of specific counts, as his critics see it, notably his compromise in the Senate on immigration, his vote against the Bush tax cuts, his co-sponsorship of campaign finance reform, his position on global warming and his involvement in the bipartisan “Gang of 14″ effort to break the procedural logjam on judicial nominees.

“John McCain gives the impression that he needs the conservatives to come to him,” said Bay Buchanan, a conservative activist. “Basically, we’ve been abused for a dozen years here, and he gives us this fatherly kindness and expects us to get in line. He has to give us a reason to vote for him because his record is not enough for us.”

Abused for a dozen years? This sense of beleaguerment — if not entitlement — is a familiar conservative posture. This is the wing that believes it built the modern Republican Party, that licked the stamps for the direct-mail operations and fueled the growth of talk radio. This is the wing that hands out the fliers outside churches and provides much of the passion and energy needed to combat opponents in national elections. This is the wing that likes its candidates to bow down and pledge fealty.

As some strategists see it, the question is not whether McCain will ultimately get the support of conservatives over, say, Barack Obama. It is whether he will win their hearts so that they will battle for him.

“It is so important in the presidential campaigns of our time, which are so close,” said conservative GOP consultant Greg Mueller. “You want the entire apparatus involved. I have never heard of an independent activist, have you? I have heard of a conservative activist. We need them, because we need to get the vote out. That’s Politics 101.”

Politics 102 is this: Conservatives seem most at home — and at their best — when they are complaining about something. They love to put on the underdog’s collar even when they are in power.

“Conservatives are always disputing something or other,” observed Lee Edwards, a Heritage Foundation historian who has written widely about the conservative movement. “They are just a naturally disputatious lot.”

This goes back, Edwards notes, to the beginning of the conservative movement, which was shaped by the 1953 publication of Russell Kirk’s “The Conservative Mind” and the founding of the magazine National Review. In the early days, the ideological debate within the GOP was often between traditional conservatives and libertarians. “This is a little bit like the Hatfields and the McCoys,” said Edwards.

During the 1952 presidential campaign, displeased conservatives wanted to take a walk because their favorite candidate, Robert Taft, had been defeated by Dwight Eisenhower in a bitter nominating fight. Taft met with Ike, extracted a few concessions and helped to fend off a potential intraparty disaster that threatened Eisenhower’s election.

Edwards maintains that conservatives often threaten, but often come around. In 1976, he said, conservatives preferred Ronald Reagan but ended up getting behind Gerald Ford, who ended up losing to Jimmy Carter. In 1988, they were lukewarm about George H.W. Bush, but the prospect of a Michael Dukakis presidency was even more revolting. In 2000, George W. Bush was hardly seen as a perfect movement conservative, but the idea of continuing the Clinton presidency with his vice president, Al Gore, couldn’t be stomached. Conservatives have not always been happy with the Bush presidency, but they Swift-boated John Kerry in 2004 even as they pushed Bush to do more for them.

Edwards puts it this way: “Do you want an 82 percent conservative in McCain? Or do you want a 100 percent liberal in Obama?”

The alternative narrative is this: Conservatives stayed home in 1992, upset at Bush the elder for breaking his no-new-taxes pledge. Conservatives didn’t rally behind Bob Dole in 1996, and look what happened to him. Some conservatives believe you have to die first before resurrection.

Saul Anuzis, the Michigan Republican Party chairman, doesn’t believe in self-inflicted pain. “In the end, for conservatives, this is going to be a very simple choice. I think you will see a coalescence of the party behind McCain.”

The McCain campaign hired the conservative consulting firm Shirley & Bannister to help. Craig Shirley, who is working on his second Reagan campaign biography and has strong ties to Reaganites, said his firm has been trying to open doors and close ranks. “At the end of the day, we’re all going to be on the same team,” Shirley said.

There has been considerable tension between the McCain camp and prominent talk-radio hosts, such as Sean Hannity and Rush Limbaugh. And McCain may not have helped himself any in that world by quickly distancing himself from fiery conservative radio personality Bill Cunningham, who was the warm-up act at a McCain rally on Tuesday in Cincinnati. Cunningham’s mocking of Obama drew a public rebuke of Cunningham and an apology from McCain. To which Cunningham fired back: He was now through with McCain, and would vote for Hillary Clinton.

“How does he repudiate me without knowing what he’s repudiating?” Cunningham said later on his talk show.

McCain strategist Black acknowledged that there are still some problems with conservative talk-radio hosts and certain conservative leaders, but he noted that more and more are joining the McCain team each week. He specifically singled out former Cabinet secretary Jack Kemp, businessman (and onetime presidential candidate) Steve Forbes and former solicitor general Ted Olson.

“It’s not unanimous yet, but we’re working on it,” said Black, who said private meetings with key figures are ongoing.

Forbes, who initially backed Rudolph Giuliani for president, had been skeptical of McCain, in part because of the senator’s vote against the 2003 tax cuts. But after Giuliani dropped out, he began watching McCain more closely in debates and consulted with his economic advisers. “I feel comfortable now,” Forbes said.

McCain has been reaching out to fiscal conservatives, Forbes said, by explaining that he understands that tax cuts can be an effective engine for the economy if done properly. His opposition in 2003, McCain has explained, was because Republicans had failed to restrain spending. In addition, Forbes noted McCain’s crusade against pork-barrel spending and his proposals to get rid of the alternative minimum tax and to provide more incentives for business research and development.

“Economic conservatives are starting to warm up to him,” Forbes asserted.

Those who are optimistic that McCain will ultimately pull the lion’s share of conservatives his way often cite his comments about appointing judges in the mold of Supreme Court Justice Samuel Alito and Chief Justice John Roberts.

They key, though, almost every conservative says — “the home run,” as David Keene put it — is McCain’s vice presidential choice. The nominee must be an unapologetic conservative, in the eyes of true believers.

“I think his veep candidate should be, has to be and probably will be either Jim DeMint [the South Carolina senator] or Mark Sanford [the South Carolina governor], and Mark’s my guy,” said conservative Republican J. Kenneth Blackwell, the former Ohio secretary of state.

Whoever it is, the sooner the better for Chris “Karl” Pohl, so he can get his hat business cranked up. “The ladies love them. They’re sexy.”

A Soviet history buff who lives in Southern California, Pohl is not so much upset with McCain as he is unmotivated by him. Like other conservatives, he’s waiting to see something, hear something that gets him fired up.

“That’s up to John McCain, I think, to convince us we won’t have any more betrayals.”

Polling analyst Jennifer Agiesta also contributed to this report.