There Are Plenty of Smart, Sensible People Out Here…..

David Scudder of Aureus Asset Management, who is a smart, sensible person, sent his thoughts out after ample New Year’s Eve reflection. He has kindly let me post them on my blog. Let’s hope 2012 brings some similar thinking to our elected fiduciaries in Washington. David’s comments in their entirety follow:

January 1, 2012

Key economic points for 2012:

1)      Endorse Simpson-Bowles plan, as by far and away the best long-term solution to our budget and deficit problem. Endorse tax simplification—slash the tax code, in particular most exemptions which favor one constituency over another, and enable tax rates to be cut (three rates of 15%, 20%, 25%), while raising revenues back to 21-22% of GDP, where Clinton era ended up. As part of the solution, agree to cuts in both Social Security and Medicare in the future (raise the age of Social Security eligibility, try to reform health care by cessation of paying for quantity of service in favor of quality). I believe that Obama’s greatest mistake has been his ignoring the recommendations of the Simpson-Bowles Commission, which he himself formed.

2)      Recognize that very few people in Congress are thinking seriously about the long-term solution. Rep. Ryan, in the House, is one of them, but while his analysis and his figures appear accurate, his philosophy is too strictly anti-tax. He wants to cap spending at 18% of GDP (too small to allow Social Security and Medicare to exist without damaging changes). However, he has recently worked with Sen. Wyden to somewhat relax his Medicare original prescription which shows he is willing to listen to the other side of the aisle.

3)      Recognize that a major problem in this country is lack of confidence. With corporate profit margins at an all time high, companies have the resources (cash as % of total assets is now 8%, way above historical average) to invest in new plant and to hire a lot of people. But executives have little faith in government (not a surprise given the terrible way Congress went at the debt ceiling and the long-term deficit reduction plan in the past 6 months). If executives believe that the long-term future has been improved, by adopting a plan like Simpson-Bowles, I firmly believe they will begin a program of steady and massive investment of corporate cash, which will raise our economic growth easily by 1-2% per year for several years in a row. Too few people realize this potential, which will be greatly helped by the adoption of a territorial tax plan as apart of tax simplification. This is the surest way to get unemployment back down towards 5%.

4)      When the country realizes that a sensible long-term fiscal plan has been adopted, which calls for every citizen to sacrifice something (with higher income people obviously being asked to shoulder a greater % of the adjustment burden), then some short-term stimulus in the way of public works spending can also be passed. But much of the intermediate and even short-term  improvement in the economy can and should come from the private sector, which has the funds in the form of cash reserves to do it.

5)      Protect Bernanke from the idiots who do not realize that, in the absence of a good long-term fiscal plan, he has been doing and continues to do an exemplary job. It’s now time, however, for fiscal policy to take center stage.

Crisis in Three Acts – Unabridged

It is obvious to all that we face a time of crisis. Unfortunately, it comes in three acts which feed upon each other – political, economic and fiscal.  It is frustrating, dispiriting and time for a change, which for better or worse, often comes in the time of crisis. Fortunately, as a society, the U.S. has ongoing enormous potential which, with the resolution of our issues, can provide a great future for all.

The Political Crisis.

Over the last 200 years, politicians, the political parties and the industry that supports them have perfected the art of political business. Politics has become a career and plenty of practices have been put in place to ensure that the career is as safe (and rewarding) as possible. Huge amounts of money are raised and spent to safeguard the career choice of politicians and those in the political-consultant establishment who serve them.  To optimize fund-raising, politicians and their handlers have refined their partisan play book to speak to the most rabid ends of the political spectrum. They spend most of their time meeting with and raising money from only those people, lobbyists, unions, PACs and corporations who fit the political profile the politician has chosen to market. Who would bother selling ideas to an unreceptive audience? They portray opponents in the most damning light to heighten the fear and fervor of those most attuned to the tales – those who will readily part with their time and money to feed the machine. The “political industry” and politicians mutually scratch each others’ back for profit and protection. It is not strange; it is business.

The longer a politician is in office, the more power he or she accrues through seniority, fund-raising and favoritism. They have found that when they veer from their evermore focused script, they lose the support of their narrow money base. This has propelled us into the land of “no compromise” – a world once occupied by only those on the political fringe. Unfortunately, now it appears that the only fringe is the shrinking middle. This art of ‘no compromise’ was born in the wars between gun control and gun rights activists and pro-choice and pro-life activists where any move to accept any compromise is viewed as the first step on a slippery slope. All of this has been aided and abetted by the evisceration of campaign finance laws (corporations are people?) and the 200-year-old legacy of gerrymandering to narrow the politics of a district. Elections increasingly happen in the primaries where the most radical candidates are often the choice.

None of this should be a surprise and none of it reflects badly on those that practice the art. They are merely doing everything they can to protect and enhance their careers whether they are politicians or part of the political industry. It is simply human nature and happens in the non-political world all the time. The problem is that those inclined to a lifetime careers as Senators or Representatives are woefully afraid of breaking bad news to us. For the most part, instead of leading, they follow. We need political leaders who act as fiduciaries, entrusted by us to safeguard and promote the assets of the U.S. – its citizen and their treasures, talents and future. Exemplary leaders understand that no one person, institution or ideology has a monopoly on the best ideas or answers and they do not demonize those with whom they disagree. Exemplary leaders understand that sometimes they need to be the bearer of bad news and that compromise is the art of the possible.

Politics as a business must end and here is how:

·         Gerrymandering, where congressional districts end up looking like a Rorschach test, must be forcefully banned. In an age with detailed census data and highly evolved mapping tools, we can easily eliminate the most tortured logic of district making. No one’s congressional seat should be protected by the privilege of having voters of a singular mindset.

·         Senators and representatives should have term limits. Twelve years for both offices. The arguments against this – we would lose great leaders and valuable political wisdom – fly in the face of today’s reality. Have we gotten great leadership and wisdom from the entrenched political establishment? Any great elected leader who chooses a lifetime of serving the country can do so in any number of other elected or appointed positions. A retiring rep can run for senate, governor, president or serve in a cabinet.

·         Primaries for congressional offices should be singular. With the current primary system, voters are ultimately presented with candidates chosen by a relatively small number of voters. The primary  process and party power makes interesting, non-party or mainstream candidates almost irrelevant.  All candidates should compete for the votes of all voters in one primary. The top two vote recipients in the primary should face off in the general election. Such a system will eliminate the drift from the center to the fringes that we experience today and balance the power of the two-party insider system with the interests of the general electorate.

All this will take real work and, perhaps constitutional amendment, but we are worth it.

The Economic Crisis.

Now it has become clear that the economic downturn was much more severe than the statistics showed in 2009. Over the last 20 years, we have deluded ourselves into believing that we had tamed the economic cycle. In reality, we relied too heavily on debt (corporate, household and government) in the good times both to shield us from the changes that our economy required and to have the services we desired while deferring the cost. In doing so, we sub-optimized the U.S. economy. We are inefficiently spending billions on healthcare and we have become too ready to have others solve our problems. Our economy is overly concentrated in consumer goods and services and financial services. Now that we have a recession from which it appears no amount of fiscal or monetary policy can bail us, it is a really ugly one. It is a crisis born from our debt-enabled delusion.

Unbelievably, however, our economic crisis is low hanging fruit compared to the issues faced in many societies. Our fiscal laziness and lack of personal responsibility has not eliminated our ability to adapt and move forward. The US economy, while sub-optimized, is huge, dynamic and innovative. We have a very good (can be great) educational system.

The ‘raw material’ of the U.S. is quite good; I would not bet against it. The U.S. is blessed with certain innate assets that many nations do not enjoy: modest population density (India is 12x ours), plenty of arable land, a reasonable trove of natural resources, few and friendly neighbors, and an accommodating climate to name a few. More importantly, we have a strong democratic history and a sound rule of law that give us comfort that investments here will not be subject to exogenous risk beyond their own inherent risk.  Private enterprise, the rule of law and strong individual rights have brought much good to those countries where they are embraced. Many of the emerging economies have short or no history of these attributes. I suspect that non-democratic regimes running market economies are less likely to respect free market rights when push ultimately comes to shove.

Our economy will eventually get better  as we work through the long hangover of our indulgences. Sadly, this is not going to come about merely because of government policies or initiatives. The Federal stimulus and Fed monetary policy was an attempt to buffer the huge economic malaise from the hangover and restart the engine. Was it money all wisely spent? Undoubtedly not, but that does not diminish the fact that the cushioning effect helped many through hard times and most probably averted a much steeper and longer decline.  Stimulus money was used for tax breaks, extra social security payments, infrastructure projects, and aid to States for Medicaid, unemployment insurance and education, among other things. With much talk about balanced budgets, let’s not forget that the Feds balanced the budgets of the States. We have already begun to see the negative effects from withdrawing stimulus. For some, this is the harsh reality that we need to digest. Obviously, stimulus cannot go on forever  but the economic balance is tricky and I fear that we have not gotten healthy enough yet to get out of the infirmary.

Economic improvement will come ultimately from increased demand, both domestically and from abroad. It will spring from millions of individual decisions that are made by our citizens in response to the crisis to make themselves more fiscally sound and economically productive. And it is happening.  First, we are reigning in our spending to de-leverage our household balance sheets. Next, we will begin to retrain ourselves and get out of our comfort zone (location, job, lifestyle) for more productive employment. Finally, we will begin to see the beneficial results of our work and seek to enjoy the fruits of our efforts. Government can help both by rationalization and investment: avoid regulatory over-reach, clear away the crazy tax code, broaden the revenue base, and squeeze inefficiencies from government spending but invest the results in infrastructure.  This will take time, energy and innovation – there are no miracle elixirs.

The Fiscal Crisis.

Our current federal deficits are the combined result of stimulus spending, reduced tax revenues (they go down in recessions) and the interest required to fund prior deficits. Remember, the Federal Government has run a deficit in every year but four since 1970. Over the last decade no one, neither individuals of means or corporate recipients of federal tax credits and subsidies, has been asked to help shoulder the burden of compounding deficits, even when the economy was strong.  Balancing a budget is a fine idea but in reality it is needs to be balanced over time. In the good years, we should be putting something aside for the lean years when we want to protect our investments in society and infrastructure.

We can solve this problem with a few simple prescriptions, well-known to all, like expense reduction (yes, there is waste) and tax code reform. Phased in over ten years, changes can be digested. The difficulty in dealing with the problem springs from the absurd partisan politics that we are seeing. (see Part I). In a Republican Presidential debate (Fox) in August, every candidate stated that they were not in favor, in any sense, of raising Federal revenues. When pressed whether they would agree to an expense cut to tax revenue increase ratio of 10:1, all said flatly “no”. Let’s see how logical that is? If you can get the Congress and the citizenry to agree to reduce government expenses by an additional $1 trillion over the next 10 years, you would walk away from that deal if it were coupled with a requirement to raise an additional $100 billion over 10 years? What is the cost of that? Well, assuming that none of it came from corporations or reduction in tax expenditures (ethanol subsidies, etc.) and, instead it came only from households, we would be asking every household (except the most destitute) to kick in roughly $100 per year for 10 years. Is that too much of a sacrifice if we are to cut expenditures by 10x that amount?

The recent debt level debate and approval in Congress was a grim lesson in sausage making; you just never want to watch it. Unfortunately, the bi-partisan Congressional Committee set up in the debt debate is another open kitchen that will display the worst of politics. While the politicians are fixated on the notion of fiscal rectitude, the country is reeling from a lack of jobs. The major reason for lack of hiring is not taxes or regulation, it is lack of demand. If we are not in a recession, we are in a ‘stagcession’. Budget balancing, while noble and appropriate over the long run, is not the right prescription for our current economic malaise. The biggest challenge facing the world’s richest country today is not our debt level; it is our competitiveness. We need to invest in key infrastructure of our economy: capital spending, raw R&D, training and education. Yes, cut waste where we can but invest it back into the economy where federal investment can be useful.

Thankfully, thoughtful people (but not most politicians or media pundits) are starting to talk about real solutions without regard to ideological source. Once people get talking about the tough solutions, the politicians usually follow. (Sorry Congress but, to date, you have been the sheep not the shepherd). Forget about the issue of who goes first and whether Plan A is workable or not; the conversations are happening. No plan and not even the ones that get approved will be perfect (a camel is a horse designed by committee) but we will make progress. Things will change no doubt: some of us may have to pay more in taxes, some of us may need to take more responsibility for reducing our medical expenses, some of us may need to work a little longer, perhaps we need to be a little less unilateral in our ability to extend our military reach, etc. There is work to do and bitter medicine to take but let’s face it, none of this rises to the magnitude of trials faced by our forbears at various times – The Revolution, The Civil War, The Great Depression, and World Wars I and II.

We are blessed to live in the United States; let’s unite to do something with our blessings for ourselves, others and our off-spring. Don’t let the self-interest of the political class, their cronies and the media pundits (Sean Hannity, Michael Moore and the like), continue to slice us and dice us into ideological camps for their own gain. Our country and society are too important to be wasted by their games.

 

Venturing to Haiti

I recently had the opportunity to join a trip to Haiti led by Linda Mason, Chair of the Board of MercyCorps. This is a very impressive and worthy organization on which I will elaborate later. For now, let me give you a few impressions which are, unfortunately, a mixture of both shock and dismay with a touch of hope thrown in.

The amazing thing about going to Haiti is that you can fly there on a comfortable American Airlines flight (90 minutes from Miami) to a well-appointed terminal without thinking that you are anywhere out of the ordinary. Our flight to Haiti was filled by well-heeled Haitians and reporters and camera crews flying in for Hurricane Tomas. I happened to be sitting next to Jim Cantore from The Weather Channel who chases hurricanes and was skeptical that this was going to amount to much.  Everyone seemed happy and I was struck that these folks had a glow despite their hardships, the impending hurricane or the ongoing cholera epidemic. As I was contemplating what I would see in Haiti, a Haitian man passed my seat slowly. He had two artificial legs and no arms but had crutches that disappeared under his shirt sleeves up to what must have been stumps of arms. He acknowledged my nod with a smile. Nobody else seemed to notice him.

The reality in Haiti is pretty tough for most people. On our drive through Port Au Prince and later up in the Central Plains, I was struck to see how little progress there appears to have been since the earthquake. We visited some of the camps for displaced people and saw the considerable amounts of rubble and destroyed homes that have yet to be removed. Over a million people are in tent camps in the City with no prospect of moving. The tents are side by side and populate every nook and cranny in the City. They are prone to flooding when the rains come. One camp literally had a gully running right through it which must flood horribly with heavy rains. Families are packed into the tents and their meager belongings are contained in something the size of a milk crate. Aid agencies support the camps and do what they can but the situation is dire.

Fortunately, the hurricane gave a glancing blow to Haiti and while it  rained heavily in Port Au Prince, there was not much wind. This was a good thing because camp inhabitants were very reluctant to leave their spaces for fear of losing their belongings to thieves or their tents to squatters. Think of that…fear of losing your tent. Despite the lack of a direct hit, some camps were flooded and more misery was heaped on the inhabitants.

Incredibly, what we saw in the camps was the better than many have in Haiti. It appears that most people in Port Au Prince have no reliable access to running potable water, sanitation or sufficient nourishment.  Trash and I mean tons of trash, is everywhere. I did not have an opportunity to see Cite Soleil, the sprawling, desperately poor slum that ‘houses’ hundreds of thousands of poor Haitians but I am told it is not a place you want to be. Throughout Port Au Prince, there are makeshift shelters for families, many of which existed prior to the earthquake. Before the earthquake, the luckier of the poor had enough income to rent a room for their family for 8 hours a day to sleep and eat before giving it up to the next group.

There appears to be two classes in Haiti: a very small elite and a very large, uneducated poor population with little hope for a future. There is little upward mobility as the middle class has largely disappeared and lack of both education and a decent economy means there is no ladder to climb. One can only deduce from what you see there that the government is inept, incapacitated or corrupt. The population is dominated by people under the age of 29 due to the high birthrate and a life span that hovers around 50 years. Most of the young are getting no formal or consistent education. Most of the children with whom I spoke could not do rudimentary addition. The average per capita GDP is around $800 per year. I was told that the seeming willingness of the Haitians to passively accept their fate might be a contributor to their lack of progress while also keeping civil unrest at bay. The high gates and armed guards of the better-off did not seem to indicate a broad level of comfort in this notion. It seems hard to believe that such a large population with little hope or direction can stand those conditions for long.

The threat of mudslides and our own schedule kept me from seeing much more than Port Au Prince. I am told however that there are beautiful areas of Haiti with plenty of land for economic development. In the Central Plains, which we got to visit for a short trip, it is clear that there is arable land but the locals lack the expertise and capital to compete in global or even local markets. In fact, when the IMF required Haiti to eliminate tariffs on rice and other food commodities to encourage a transition to a free market economy, local farmers had no hope of competing even in their own country with imports from the US and others.  The country can no longer feed itself. Other businesses were further devastated when the US initiated an embargo in the 1990’s after the overthrow of Aristide. Theory is great but reality can be a lot rougher and the tail of unintended consequences is a whiplash for many.

Haiti needs money, expertise and an honest, hardworking government. They are getting money and expertise from international NGO’s although coordination and lack of faith in the government infrastructure has kept the pace of investment slow. MercyCorps is an expert at dropping into regions of crisis and finding ways to make positive change in the chaos of crisis. Happily, they hire locals so that they have a better sense of the situational context and so their initiatives are sustained in the aftermath of crisis. I was extremely impressed by the dedication, professionalism and work ethic of the Haitians on the MercyCorps staff. The projects that MercyCorps has started should create economic opportunity and hope for those that they touch. It could be much more. In the end, whether Haiti will rise or continue its fall is dependent on the Haitian people, particularly those with the character, training and wherewithal, whose dedication will be required to save their own country. MercyCorps understands this; let’s hope the Haitian people do too.

 

 

 

 

It’s Stimulus, Stupid!

Everyone is hyped up about stimulus – whether it worked or not, should we do more, and why it is good or bad. Among some circles, the word ‘stimulus’ has become toxic and it is the rallying cry for those who want to caricature the current administration as socialist, incompetent or downright evil. It has gotten to the point that the Democrats will not use the WORD for fear that they will be painted as big spenders (or worse) by the Republicans. But all politicians want to stimulate the economy (but not with stimulus!) because they know the economy is not healthy and does not appear to be getting much better soon.  Spending is also what politicians, of all stripes, do particularly well. (More on that in the upcoming piece “Time for Term Limits”).

The question at hand is how to stimulate most efficiently and effectively with the least long-term negative consequences. The Democrats have put forward and enacted proposals that combine tax cuts, infrastructure spending and support to state and other programs for unemployment, education and retraining. The first stimulus was mostly this stuff together with other spending and all of it is called ‘stimulus’. Apparently that spending has either not been enough or not properly spent to get us out an economic decline which is worse than initially believed by the prognosticators. In the Republican vernacular, even though they argue that tax cuts will help (stimulate?) the economy, tax cuts are not stimulus because they are hell-bent on tax cuts but dead set against stimulus! If a tax cut does not stimulate the economy to eventually increase tax revenues then why the heck would we do it when we have a major deficit?

What’s the difference between a tax cut and increased federal spending? Well, both have certain similarities: they both initially increase the deficit and they are both meant to stimulate demand. How well they each stimulate demand or the economy is a matter for debate and a worthy one at that. But let us not get trapped into a silly semantic battle: tax cuts increase the deficits and then hopefully pay off in the future. Some level of government spending does the same thing although the payoff may come in the form of infrastructure, increased services and/or increased business activity. Unless you take the position (which may be right and painful) that the economy is so structurally flawed we need to take it back to the studs, then some combination of tax cuts, tax rises, government cuts and government spending is going to be needed to get us out the Great Recession and our country-wide balance sheet mess. All the tools need to be used and everyone needs to put their ideological (really ‘political’) baggage aside for us to work ourselves out of this mess.

If it not stimulative, don’t do it!

Does Anyone Else Think This Is Crazy?

It seems that every time I read a current news story about the global economy, I see the argument that Germany needs to spend more to pull Europe and the US out of recession. Somehow they ‘are not doing their job’. This seems strange: The countries who have used excessive debt to fuel excessive consumption ask another country which has followed a more sober course to veer off the straight and narrow. There is no question that if the Germans used more of their savings to consume more, their economy would be larger, but to what end? To make them more like the sick countries?

This is not a parallel to China which actively manages its economy and currency to suppress consumption and increase exports, and whose citizens go without the basic necessities in many cases. What we have in Germany is an economy, which for now, seems to be working the way it should be. They do not live beyond their means. They have had a positive Balance of Trade for 20 years.  They do not over-consume. Surely, they may face a future problem with social benefit obligations and a declining population but that is one faced by virtually all the western economies. I have heard it argued that the German economy is at risk given its “over-dependence” on exports….If these drop, the economy will suffer. True but at least they don’t have a lifestyle supported by debt and a tragically low savings rate.

I can certainly accept the argument that China needs to get off the plan of sucking resources out of all the Western countries while keeping their own domestic spending throttled. I think that it is short-sighted to argue that Germans should change their savings/export-oriented culture to bail out the rest of us. People buy German products because they are good not because they are made on the cheap with impoverished workers or have the advantage of a manipulated currency.

This brings me to one more riddle: If the US has been living on an unrealistic amount of leverage for about 30 years, what would GDP growth have been if we had  a normalized (i.e. sustainable) debt and savings load? Said differently, how much of the economy was created by debt that we should never had borrowed? How many homes were built, cars bought, roads repaired, electronics acquired, wars fought, space shuttles launched, etc during that period for which we really did not have the resources? We were living above the mean natural growth rate of our economy in an unsustainable manner; how much ‘reversion’ do we have to go through to get back to an economy that can grow at a reasonable rate? The answer to this question may point to how long we will have slower than sustainable growth as we revert to the mean. Without a healthier or positive balance of trade (more exports) from economies which are growing faster, I think that it could be a long slog.

Hyperinflation Reprise

I wrote this in July 2009 and am republishing on my own blog. Not much has changed. Recent statistics show that M2 (the broadest, published measure of money) has barely moved (+$100 billion)since the huge injection of liquidity into economy. M3 (an even broader measure) is no longer published by the Fed but private estimates indicate that it has actually declined relatively significantly since its peak in mid 2009. The current climate would argue for continued moderate stimulus through jobless benefits, tax credits or selected capital investment in infrastructure while also beginning to tackle long-term systemic excess in federal, state and local budgets.

Here is my take on Art Laffer’s article which has gotten a lot of play from the WSJ.  He is concerned that the Monetary Base (M0) increasing by $1 trillion will create inflation. According to economic theory (and I am not an economist), the theory on this is that increased M0, when in the banks, will result in more lending creating more Money Supply (M1, 2 & 3) and that will lead to more demand for goods and services. If unmet by available supply, this excess demand drives up prices. Money Supply is a function of lending but the fundamental starting point is M0. So, the conventional wisdom that the increase in M0 will lead to inflation makes sense to me. That’s the conventional wisdom, but I think that there are other factors at play.

The over-expansion of credit to unsustainable levels has ended and we are going through the “Great Credit Contraction”. (I am going to call it the Great Credtraction). Without easy credit as a multiplier on the Monetary Base, M1, 2 & 3 will contract significantly. Increasing M0 by a trillion goes part of the way to replacing the large sucking chest wound that the economy got when crazy credit got withdrawn. Given that we have not yet seen much of the commercial property or credit card deleveraging yet, we are probably set up for more Money Supply contraction. That is a potential cause of deflation and the increase in the Monetary Base is really the only way to plug the hole when there is no way to expand credit availability. (Interest rates have already been cut to nothing). In essence, the Fed had to make supply available while also tightening the reins on credit quality. Since we will probably never go back to the leverage levels (bank, brokerage, consumer, mortgage) that we saw over the last decade, the increase in the monetary base is not that threatening. Interestingly enough, M1 (which includes M0) is only $200 billion more at the end of May than it was in May 2008 despite the fact that M0 was increased by $1 trillion, the savings rate spiked and people pulled cash out of other investments like the mattress was on fire. So, where is the beef? 

I guess the concern is that once the economy really gets humming, this increase in M0 will allow for too much lending and too much demand. Quite frankly, with the deleveraging going on, it is hard for me to see that we will get anywhere near the amount of credit into the market than we had over the last decade. By the way, with that entire “credit” stimulus that we had, where was the core inflation? (Nowhere). Consumer demand was met handily. There was asset inflation (housing for instance) caused by excess capital chasing returns but I think we all understand that issue will not repeat in the near term. Anyway, I just don’t get the hyperinflation conventional wisdom but then again I am not an economist (with no disregard, only disclaimer) or a market “guru” (Drucker: ‘another word for charlatan’).

Venturing to the Gulf of Mexico

 This last weekend I went to the Louisiana Coast with Bud Ris, CEO of the New England Aquarium and several other Aquarium Trustees to see the current state of the Oil Spill. With us were Barbara Burgess, Donna Hazard, Mary Renner, Carolyn and Joe Campanelli, and Michelle King, a Louisiana native and wife of Trustee Tom King. As Chair of the Board at the Aquarium, I felt compelled to see for myself what may turn out to be one the larger environmental disasters of our lifetime. Other than the ongoing work we do in education, conservation and research around the Oceans, the Aquarium has been involved with saving and rehabilitating endangered Kemp Ridley Sea Turtles for years. Our staff has been on the ground in Gulf over the last two months dealing with oiled turtles and other animals. For a detailed write-up on our trip and the work of the Aquarium staff in the Gulf see http://rescue.neaq.org/.

 Our primary destination was Grand Isle, one of the many barrier islands along the Gulf Coast which are ground zero for natural and, now, man-made disasters.  After arriving there Saturday night, I found myself Sunday morning sitting in a ‘camp’ overlooking the Gulf of Mexico.  The setting was gorgeous as the sun rose and the steady southeasterly stirred up waves against the beach.  As I lowered my vision to the shore, the scene shifted as reality came into view. Trucks and ATV’s travelled the beach, the smell of oil hung in the wind, and fences and plastic booms ran the length of the beach as far as I could see. The beach is closed to the water except for the National Guard, State and Federal officials and workers hired by BP to clean up the oil and collect the oiled animals, living and dead.

We were hosted there by a variety of locals headed by Barbara Picard, mother of Michelle King. The two hour drive from New Orleans was a steady revelation of the consequences of the spill. Shrimp boats were gone from the bayou that lined the road – not out shrimping but equipped with booms to collect oil. As we crossed the causeway to the Island, the industry came into view. In the inland waters, well heads right off the road were visible. On the distant shore, cranes, boats and equipment sat and beyond that the drilling rigs off the coast.  If you think that you have a big problem with looking at a windmill, you have nothing on these folks who share the natural beauty of their environment with the industrial consequences of our economy.

During 24 hours on Grand Isle, we spoke to locals, hired boats to head out into the spill and collected both oil and lots of opinions. There is no question that a huge response has been mounted. Its effectiveness remains to be seen. The consequences – environmental and societal – will play out over a long period of time. There is no question that oil dominates the life of the Louisiana Coast. Most people have some job that is related to the search for and production of oil. That relationship is not likely to change soon.  There is plenty of blame for BP, but a fairly strong sentiment against the drilling moratorium and a general defense of the industry. I was a bit surprised at the antagonism towards the Federal Government for not ‘fixing’ the problem given the underlying anti-Washington, anti-regulation attitude that seemed part of the fabric of many conversations. It is a fairly human reaction to cast about for blame in the midst of a disaster and it is seldom that we admit the blame is somewhat collective. Better to blame the evil empire in Washington for either too much or too little regulation and then not having the expertise or resources immediately to fix the problem.

What was clear to me however is that this spill is a huge disaster. Lives of all types have been affected or ended. The coastal wetlands will take years to clean-up and a way of life may change for the foreseeable future. Perhaps from this environmental wake-up call and the huge impact on BP (something I don’t wish on their shareholders), something good will come of the carnage. Less risky approaches to deep-water drilling. (A relief well drilled simultaneously from the outset?). More sensible regulatory approaches calibrated to the risk not the reward. Closer scrutiny by local officials and citizens. A more serious drive to free ourselves from carbon-based, inefficient transportation. (Our largest, by far, consumer of oil). We are all in this together and we need to act like that.