Thanks, George W Bush, for the BP escrow fiasco

Daniel Rothschild
June 18th, 2010
Politics

In today’s New York Times, David Sanger analyzes President Obama’s expansive use of the presidency not as a bully pulpit but to act as planner/shareholder/dad-in-chief:

But President Obama’s successful move to force BP to establish a $20 billion compensation fund that the company will have no voice in allocating — just a down payment, the president insisted — may have been the most vivid example of what he recently called his determination to step in and do “what individuals couldn’t do and corporations wouldn’t do.” With that display of raw arm-twisting, Mr. Obama reinvigorated a debate about the renewed reach of government power, or, alternatively, the power of government overreach. It is an argument that has come to define Mr. Obama’s first 18 months in office, and one that Mr. Obama clearly hopes to make a central issue in November’s midterm elections.

The real issue here isn’t — or at least shouldn’t be — the “size and scope” of government, to employ that chestnut. What’s really frightening about the way that Obama sees his role as unconstrained by law or regulation on what he can or cannot do. If the president decides that a private company should establish an escrow fund with the federal government, he doesn’t need a law or regulation to set up how this works. He just needs what Rahm Emanuel calls “a power other presidents have used — you call it jawboning.”

It may make every bit of sense for companies that drill offshore to, in the case of an environmental catastrophe, have an escrow fund managed to pay the victims of their recklessness, carelessness, or bad luck. And as Richard Epstein argued, BP doesn’t deserve to have its liability capped.

But if this is the case, there should be some kind of legal or regulatory means for addressing this. A whim of the president is not, in a country that can meaningfully be said to be governed by the rule of law, sufficient basis for this. And by putting the money in an “escrow fund,” it gives the illusion that there’s some kind of contractual or due process mechanism at play here. There isn’t. Procedure matters in a liberal democracy; getting to the “right result” isn’t enough.

Of course, Obama couldn’t do this if his predecessor hadn’t teed up such a perfect shot for him. So well done, Republicans. Your insistence that the “unitary authority” of the president allowed him to imprison and execute at will has been reapplied from real people to the legal persons that are corporations. Nothing Obama’s doing is inconsistent with the Bush doctrine on presidential power. The target has merely shifted. Heck, it’s really just a continuation of existing Bush administration policy: Hank Paulson did the same thing when forcing banks to take TARP money, though at least TARP could hide behind the fig leaf of congressional action.

Somewhere from his lair on Skullcrusher Mountain, Dick Cheney is smiling. And remember, libertarians told you so.

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