The National Commission on the BP Deepwater Horizon Oil Spill recently
issued its report to the President. Consistent with previous findings,
the Commission found that a series of missteps led to what’s been
called the worst ecological disaster in U.S. history. In describing the
multiple causes of the disaster, the Commission described how the participants
missed warning signals, failed to share information, and lacked understanding
of the real risks involved.
Another observation which may not get as much attention relates to oil
spill liability. In discussing that topic, the Commission described exactly
the reason why caps on liability are bad policy. It said the spill’s
victims or federal taxpayers should not “have to pay the bill for
industry’s shortcomings.” According to the Commission, increased
liability limits “would also serve as a powerful incentive for companies
to pay closer attention to safety, including investing more in technology
that promotes safer operations.”
As the Commission recognized, caps do not make disaster costs go away.
The families of the workers killed in the Deepwater Horizon explosion
must still be supported financially, and the enormous costs of environmental
cleanup must still be paid for by someone. Caps just shift these costs
from the party or parties directly responsible to the taxpayers.
This is not just true for liability caps under oil pollution laws. When
a person is seriously injured or killed, whether it is through an auto
accident, medical malpractice, or a workplace hazard, someone has to pay
for medical care or financial support. The question is not whether the
financial burden exists; it does. The only question is who should pay for it.
There could not be a worse time for shifting costs from private industry
to taxpayers. Unlike ordinary Americans, large corporations have recovered
nicely from the affects of the recession. They are sitting on enormous
cash reserves. Federal and state governments, on the other hand, are drowning
in debt. Putting more liabilities on taxpayers to make life easier for
private industry in these times is financially suicidal.
The Commission’s point about safety is also important. The threat
of liability for injury or death claims, in the Commission’s words,
create a “powerful incentive” to improve worker safety. Conversely,
liability caps reduce a company’s incentive to strive for a better
workplace. For-profit corporations, by their very nature, exist to make
money. The best way to make them behave responsibly is to take the profit
out of cutting corners in a way which puts others at risk.
The oil spill, the Massey mine disaster, phony documents used by banks
in foreclosure cases, and the sudden acceleration problem with Toyota
vehicles, were all major news stories last year. To see why liability
caps are bad public policy, all you had to recently was read a newspaper.