Real World

With all the hype on all sides of the political spectrum about stimulus and jobs, here is a short piece from a mid-size business owner (who actually manufactures something...) on why his business is not ready to hire, yet.

I think it's going to be awhile before those unemployment numbers start to decline. And remember, we are adding more people to the work force than jobs we are creating.

Are We In Recovery?

Last week John Bernanke, head of the Federal Reserve, spoke to bankers at a conference in Jackson Hole (wow, I bet my friends who are fly fishing guides on the Snake River got a little economic stimulus last week! Way to go guys!). At the conference Bernake stated, unequivocally, that our economy is now in recovery.

At the risk of hammering at this point a little too much, I keep wondering whether the recovery is for Wall Street or Main Street? And indeed, the business and economy reporter for the Seattle Times wrote a nice, short piece about jobs and recovery. Until the United States figures out how to create jobs, sufficient to employ the unemployed and sustain the job creation at a rate of 127,000 a month (to keep up with population growth) this so-called recovery isn't going to help those who are gazing at computer screens trying desperately to find jobs.

The promise of green jobs is going to take many many years. Throwing money at industries like the failed banking system hasn't helped, since they have not been on a hiring binge as they figure out how to increase interest rates on credit cards, over-draft fees, and pay huge bonuses and lobbying salaries.

Looking at what remains of our manufacturing sector is also sad. Boeing continues to threaten both local governments and its unions that it will pull jobs away from areas like Western Washington and send them overseas or to the south where they can bust the union, unless Boeing receives even more tax credits and a no strike clause in its union contracts. At least in Washington, small businesses that actually have to pay taxes and consumers who are hammered with one of the highest sales taxes in the nation, are already subsidizing the highly paid executives at Boeing and Microsoft. But they want to squeeze out even more, while the state has to cut and ax people off of Medicaid and other social safety net programs.

Something is very structurally wrong with our economy and unless we correct the course rather than band-aid it, we'll be talking about these unemployment numbers over and over during the next 12 months.

So, just whose recovery is this?

Ta-Da! Recession Over. Sadly, Pain is Not

No longer waiting around for the stimulus money to "trickle down" to its citizens, Tennessee decided to put people to work in the fashion of a New Deal works program. The several hundred people in a rural Tennessee county who were laid off when an automobile manufacturing plant went to Mexico, were able to find state jobs in, yes, the unemployment office, working on thinning a forest, and other public works tasks.

And this is good, because despite economists declaring the recession "officially over," the pain of unemployment, lost value in retirement equities, and increasing prices in necessities such as gasoline, are continuing to hit everyone.

We have a long way to go before anyone feels like they are out of the woods. The so-called green job creation may, at it's peak, develop into 2.4 million jobs, a mere drop in the bucket of how many jobs have been lost in this recession, much less how many more need to be created to keep up with the growing work force.

While housing sales are increasing, house values continue to slide. In other words, people are buying, but sellers are losing value with each sale. Most of these sales are excess inventory or subsequent to bank foreclosures.

As the Slate article suggests, don't download Happy Days Are Here Again.

Further SIgns Green Shoots Are Whithering

The news in the construction industry is not good. Here in the Seattle area, defaults in construction loans are at an all time high.

We have a long way to go before we really begin to see progress. And is it only me that missed the fact that less than 30% of the economic stimulus money would be "on the streets" this year? Whatever happened to "shovel ready?"

Meanwhile, large manufacturing industries, such as Boeing, are threatening politicians who are indirectly hammering unions about strikes. The implication is if the machinist union agrees to a no strike clause in their contract, Boeing may consider staying in the Puget Sound region (or keeping their much maligned "Dreamliner" assembly plants in this region). This after Washington State gave Boeing enormous tax incentives to keep the assembly plants here in Washington. It seems we have forgotten that middle class blue collar jobs are an important, no vital, component of a healthy regional economy.

We have a long way to go to pull out of this economic debacle.

Green Shoots Doused?

The Obama Administration is touting "green shoots," their language for signs on progress the economy is turning around. Small pieces of data, they say, indicate that their stimulus package is beginning to work. One such data point is the unemployment rate which was announced last week. While 9.5% is the highest in over 20 years, the Administration asserts that the rate of increase in unemployment is slowing down. I feel better already.

But really, the economy is still reeling and the slightest hiccup can cause problems. Over the past few weeks gas prices have soared. The price of a barrel of oil has risen even more and for the first time in a long long time, gas prices have not even kept up with the price of oil. Increasing oil prices are frequently a sign that the economy is growing. Most oil traders subscribe to the notions of supply and demand. If the economy is growing, demand for oil increases and given the oil cartels and, well, er, greed of the big oil companies, supply is often limited. When the Obama Administration announces there are green shoots, in other words, hope for the economy, oil traders boost the price of oil and gas prices soar.

But here is the problem. Over 9.5% of Americans are unemployed. In most places it takes a car to look for work. Go to the unemployment office, to job interviews scattered throughout the area, pick up kids from school, network with employed parents on the sidelines of the soccer game, you get the idea. If the cost of gas increases, as it has, then something on a fix income has to go. Green shoots wither.

And of course, there are the transportation wonks who advocate increasing federal gas taxes so people can not afford to drive (one of these days I will talk about all my environmental colleagues who owned large cars and drove to work, every day).

I don't envy the economists and budget gurus advising President Obama. This is a delicate and tough time. Hopefully, however, they are paying attention to the little things that can send families over the edge. Gas prices are certainly one of them.

Can Green Technology Save Us?

Now that the economic stimulus bill has been signed into law, it's time to examine some of the assumptions contained within the legislation and campaign rhetoric about green technologies (which the development of those technologies is a key element in the jobs creation).

It goes without saying that green technologies are not particularly environmentally friendly, in other words, often the most "green" thing you can do is if your appliance, car, house, or whatever is working, don't replace it.  Replacing with "green" items is as bad or worse than doing nothing.  

However, now the emphasis is on clean energy.  While commentators from other regions of the country drool over clean power, the Pacific Northwest, semi-abundant with large and powerful rivers, knows full well the impacts of hydroelectric power, considered clean by so-called energy gurus (as in it sure beats coal).  As with everything, there are pluses and minuses to hydroelectric power, just as there are with coal, nuclear, wind, and harnessing the tides or waves.  In my opinion it will take a mix of all potential power sources, not relying on one or two, to create a relatively green source of power.

Hydro power not only increases the temperatures of the rivers, but it also creates an impassible barricade to anadromous fish such as salmon and steelhead.  And these barriers are extremely difficult to "fix" in order to assist salmon in their return to spawning grounds.  In the Pacific Northwest we have fish hatched, barged, trucked, fish laddered, and airlifted salmon up and down the Columbia and it's tributaries, and still find ourselves listing salmon spawns on the federal Endangered Species lists.  Not only is the spawn an issue, but once you create an impassible barricade, predators become an impediment to the fish, such that the predators such as Sea lions or Caspian terns become prey of humans trying to prevent lower numbers of salmon spawn and yes, the cycle continues.

Then, there are the issues of displacement that we witnessed with China's massive construction of the Three Gorges Dam or the potential irrevocable damage to First Peoples with the proposed Hydro-Quebec's dams on James Bay.  

And, of course, when any technology is seen as a panacea for perceived problems, we overlook or neglect the problems with the technology itself.  For instance, the actual mileage per charge for electric cars is almost 50% less than originally touted.  Plus, there are the issues of battery disposal, much less the amount of electrical energy the cars require.

Ah, then there is the issue of increasing our power capacities.  If we're going to be finding and developing "green" power, the major problem is apparently the current power grids in this country can not handle new sources of power (wind, solar, geothermal) and are vastly  over capacity as it is.  Recently, Senator Harry Reid from Nevada, the current leader of the majority in the Senate, introduced a bill to have the federal government essentially take control of siting of the the high voltage power lines.  In other words, removing all the regulatory red-tape from 231 different state agencies across the country, so that the feds can determine where to put power lines.  Which on it's face seems like a good idea, except who really wants a high tension power line running through a national forest (the bill asks that federal lands be opened up for these kinds of lines) or even, gasp, in your back yard?

Today, I had an appliance repair man come over to fix my oven.  I have this old stove, my guess is it's at least 25 or 30 years old.  The bottom heating element died on the oven.  It cost about $175 to fix.  I've thought for years about replacing it, getting a swanky stainless stove (in fact, I had a free one that was gas a few years ago, but that is a whole other story about my city's bureaucratic nightmare on digging a hole to access the gas main).  But the repair man said to me: "listen, this is the best stove GE every made.  It will last you a long time.  Hold onto it. "  And so I will.  And to me, that is the greenest thing I can do.

As an aside, he also told me that appliances are being made, now, that will generate an error code which will be transmitted to the manufacturer's service division, who will then email or call you to set up a time to repair...he said, that will put him out of business.

As we look to these new and amazing technologies we need to remember we are beginning to emerge from a decade, if not longer, of jumping feet first without looking, thinking, pausing.  It's time for us to  pause, to pencil out all the ramifications of our love affair with more and more technological solutions to our environmental problems.  If the noodling says these technology is worth it, given all the consequences, then let's go for it.  If not, there will be other answers over time.  Remember, the root of conservation is conserve, to be conservative.  Sometimes that is a good thing!

Rural Economies

The State of Washington has maintained it "trust" lands that were deeded to them by the federal government when it became a state.  These trust lands are required by federal law to maximize income for education, and thus, the trees are managed under a sustained yield model and sold for timber to the highest bidders.  Funds are then used for local schools and state universities and colleges.

However, with the economic meltdown, projections of income from these state trust lands has greatly diminished.  The state trust lands, which are distinct from other state own forest lands and federal forests, provided some of the last places where small timber companies and family owned logging operations could find, log, and mill wood.  Unfortunately, these small operations will probably not last during this recession.

What concerns me are the attitudes from primarily urban based environmental folks who see this decline and probably demise of small logging and milling operations as a good thing.  I could go on a rant about this, but only want to suggest that if we want to think about buying local as a good thing, then we ought to remember that includes wood products.  

As we begin to unravel what is in the economic stimulus package, I hope we begin to realize all boats are rising and falling on the same tide.  Rural, suburban, urban.  No one is better, all of us can be worse.

More Thoughts on Compensation

First, here is a link to a video of President Obama discussing the salary caps he ordered on firms (banks and auto industry so far) that receive bail-out money from the federal government.

But I have some more thoughts about this issue.  As I type this, lobbyists for every single business group (oops, I almost said industry group, but we really don't have much industry in this country, so...) are walking the halls of state legislatures and Congress, seeking more and more tax credits or breaks.  Their usual song is if we don't get more tax credits or breaks, we'll up and leave for another country.  Business lobbyists are whispering in the ears of city council members, mayors, and county executives, asking for incentives, heck, even cash, to keep their businesses from moving to another location which will be willing to offer them land, money, and God knows what else.  I would guess that nine times out of ten, these businesses will get what they are asking for.  Meanwhile, the rest of us, you know, the ones that don't have a lobbyist working the halls, whispering in ears, we get tax hikes to pay for the tax credits the businesses get.  And I am not talking about small businesses, I am talking about Boeing, Microsoft, Google, IBM...

Meanwhile the executives of those companies continue to pull in millions of dollars in compensation.  

So I would ask, aren't the tax credits and incentives that we give those companies similar to the cash the federal government is giving banks and the auto industry?  Shouldn't state governments, heck, even Congress, begin demanding that if the corporations want special favors then they have to give something back other than staying in some state for a few years then bailing anyway?  And, oh, does anyone every evaluate whether they are successful?  Millions in tax credits to Boeing and they are laying off, not retaining employees in Washington State.

Nope, I think it is time that we examine the whole cocoon that has woven around American corporations.  It's a myth that there is a free market.  Each and every company has become a, to use the crass term from the Reagan era, welfare queens, driving in their limos to the welfare office, which happens to be the legislative bodies, and asking for hand outs without having to make their business actually work.  We cut off women who weren't looking for work from welfare, I think it is time we cut off corporations that are not working for us.  We seek further restrictions on executive salaries (I frankly don't buy the hiring the best help, because they sure weren't doing a good job for the past few years, now were they?  Plus, where are the "smart ones" going to go anyway?), we increase their taxes, and we hold them to the fire on environmental and labor issues.  

Maybe we'll begin to have businesses that actually produce quality products and that succeed.  

Who Elected These People?

When I was growing up I remember my father debunking the ultra-right wing conspiracy theories that the world was controlled by the Trilateral Commission, or bankers, or the Rockefellers.  

But now, I am beginning to believe those folks were on to something.  The World Economic Forum has been held in the ski resort town of Davos, Switzerland for 38 years, but in the past decade, it has become the must go to event for the world's powerful and gliterati.  Former President Bill Clinton, Angelina Jolie, Former Prime Minister Tony Blair, heck, even African dictators muscle an invitation.  Private jets fly corporate executives, cocktails and dinner parties entertain the attendees, and apparently there is a famous all night party hosted by, of course, Google.

So who cares if they are in Davos or Cannes?

The difference is, in Davos there is a lethal mix of corporate interests and policy makers, all allegedly talking about how to help the world.  And indeed, theories about free trade and the globalization of the economy (the lifting all boats idea), are discussed with enthusiasm.

It has been reported (which, by the way, hot-shot reporters and opinion makers like Arianna Huffington and Tom The World is Flat Friedman not only attend, but give talks at this Forum) that at this years forum which recently ended, many policy makers and more than likely corporate leaders, derided American politicians for including stipulations in the stimulus packages before Congress that American produced goods should be used on infrastructure projects.  And these leaders say, if America is not careful, free trade will end.  With straight faces they assure Americans that China will have an open bidding process for their infrastructure projects, so maybe American steel could be used for railroad tracks.   Raise your hand if you believe that any American manufacturing company will win a bid in China.  

But really what these threats are about is that the rest of the world still views the United States as one large consuming population.  And if we become even the slightest "protectionist" it means we won't buy BMWs from Germany or running shoes made in China.  Since we barely manufacture anything in the United States, those countries are not afraid of us flooding the world markets with goods, but rather that we will not buy their goods.  

I am not a buy American person.  I don't think I have ever owned an American car, although the foreign car I own now was manufactured in America.   I buy Chinese made running shoes, wear Mexican made jeans, Vietnamese made fleece vests, Thai oxford cloth shirts.  But, I do resent the simplistic and self serving pro-globalized economic arguments that are made these days.  And I think it behooves us to spend time examining the fundamentals of what went wrong with our economy before we gleefully return to spending money on imports.

Last, I really want to know who elected those people who attend the World Economic Forum and why it is the rich, powerful, and famous all get together to decide the fate of this world?

Boeing, Starbucks...

Yesterday's news brought even more layoffs: Boeing and Starbucks.  These are just the mega corporations we hear about, look around your neighborhood and notice all the small businesses going under (a local high-end consignment shop posted a sign in the window saying: Uncle! as it goes out of business).  Even the Stanford Business School laid off people last week!

While the economy is dominating my thoughts, I also wonder what is happening with employment in this country.  It used to be, post World War II, that corporations made a covenant with both white collar and blue collar workers: produce and you'll be employed for the rest of your life.  Pensions were given, health care benefits, raises, promotions.  Men primarily, but some women, routinely stayed at the same place of employment for 40 years!  Now days, the average American worker stays in one job for no more than 4 years.  That's right.  4 years.  

That is a lot of mobility in an employment structure that is not conducive to mobility.  When you leave a job you lose medical benefits.  You have myriad confusing forms to figure out what to do with your retirement, and chances are close to 100% if your employer controlled your pension (if you have a pension) it was invested in the employing company stock which is probably worthless (think United Airlines, Enron...).  And with the unemployment, despite the federal laws requiring continuation of medical benefits if the insured is willing to pay 102% of the premium, there is a huge huge strain on the medical system either from delayed and deferred treatment or people seeking treatment without the capability to pay.  

Then there are the actual jobs.  Aside from lawyers and doctors, does anyone actually work in professions they trained for?  Do any "blue collar" workers perform work that they enjoy?  What do 18 year olds want to be when they graduate from college?

Our whole work world has been re-structuring for the past 20 years, people not made sufficient wages or salaries to keep up with the costs of living, so they hocked their homes, their cars, their children's education savings in order to pay the mortgage, the electrical bills, buy groceries.  Instead of paying good wages, our economic geniuses relied on credit to keep workers working.  The covenant that was made: produce and we'll take care of you has been broken and now the economy is broken.

John Thain defended giving bonuses at Merrill Lynch after suffering huge losses by saying if he hadn't given the bonuses the "Bull" would have lost good people.  Who were those good people?  The company was losing money, lots and lots of money!  Yet good people who work hard, very hard, are being laid off because of the numerous mistakes, no, the greed of a lot of Merrill Lynch "good people."

So how do we begin discussions about employment in this country?  How do we talk about the burden and hardship we put on people, demanding they re-train, re-train, re-educate every four years?  How do we help maintain health insurance and retirement?  How do we make work important to our lives, not something we panic and worry about every morning, lose sleep over at night, and cringe at doing.

Maybe those questions are also part of economic stimulus.

Shovel Ready?

I frequently hear the following from my urban friends: Why can't we just be more like Europe?  Most often, the statement is a prelude or a conclusion to a discussion about transportation issues.  And usually the statement either implies or is stated explicitly that European transportation systems are vastly superior to ours.  The unstated is that Americans rely on cars and Europeans don't.

Of course, when I think about every time I have been to a major European city, Paris, Rome, Madrid, Vienna, Berlin, Copenhagen, all I ever see are cars, cars, cars, but the fact the Europeans have a well developed and sophisticated rail, light rail, and street car system is the envy of every urbanite I know.

Here are some interesting facts: Europe is 3, 930,000 square miles.  The United States is three times that area, 9,161,923 square miles.  The European population, however, is 731,000,000 and the United States is 303,824,640.  Hmmm. So Europe has more people and less area.  Density.  Urban planners will drool, thinking all that density fits neatly into a city.  Wrong.  In fact, Europe has been suburbanizing at the same rate during the same time period as the United States.  And, as you can see by the graph above, many European countries have more cars per capita than the United States!  Heck even New Zealand has more cars per capita than the US.  In fact, just as we use our cars as the default method of transportation (we use them 88% for motorized transportation) Europeans also default to passenger cars (78% of the time).

Less than 100 years ago, many of our National Parks were opened for tourists because of trains.  Great Northern Railway opened up Glacier National Park, Northern Pacific helped build Old Faithful Lodge in Yellowstone, and the Santa Fe Railroad took  visitors to the steps of El Tovar in The Grand Canyon.  Trains rode up and down the eastern seaboard, taking snow bound residents to the sunshine of Florida.  But in those days, whole families could ride trains, meals were served, heck even dogs could accompany their owners.  In Europe this is still true.  

However, now days other than Glacier National Park, with it's three train stops, and parts of Vermont, there are very few wild lands accessible by mass transportation.  If we begin to limit that accessibility, making it too expensive for people to visit, we become a truly class-based society, where only the rich can get outside the urban areas.  Sounds like something out of a 19th century Dicken's novel.

Our inclination in this country to ascribe one size fits all solutions simply is not part of our culture.  If we want to increase our mass transit capacity we must also understand not everyone is urban, not every one commutes on a 9-5 schedule, many families have after school sports, youth activities, and child care duties.  Our communities have not been built to address those needs and the current in vogue "transit based" communites seem, well, uninviting.  The issues to make all this transit infrastructure work in the US are multi-layered, complex, and structural, requiring more time to work on than simply shoving money into an economic stimulus package.

But really, if we want to use Europe as an example, we also need to realize we'll be laying train tracks inside National Parks, through old growth forests, wildlife habitat, and essentially opening up this country far more than we have agreed to in the past 30 years.  It is not a decision we can make quickly.  In some regards, ironically, it has been the automobile that has allowed us to conserve so much land and wildlife habitat, simply because we haven't had to develop it so everyone can get there.  Now, that's an interesting thought.

The other issue is, of course, that many of the same folks who advocate increasing our mass transportation infrastructure also rarely use the transit systems we now have.  The current mayor and all of the Seattle City Council members drive to work.  Their excuses are what everyone's excuse is: I need a car for meetings (or the mayor's is that he needs a car for security!).  So, I ask, how are the policy makers different from every one else?  In Europe, you actually see the policy makers in mass transit, not driving around in large black SUV motorcades!  I would suggest before we listen to our decision makers about transit decisions, we insist they use the current systems for a little longer than a photo op.

Remember, in terms of dollars, transportation systems, as in mass transit, are subsidized by taxpayers to the tune of .82¢ per mile.   Taxpayers subsidize passenger cars .20¢ per mile.  There has got to be a better way for us to get value out of mass transit and national transit systems.  But I think it requires some good thought, not knee jerk reaction because there may be money on the table.

In the meantime, maybe, then we should not be objecting to so many shovel ready projects.  Repairing a few bridges is not that high of a cost to pay.

 

And Now, Even Microsoft

Today, Microsoft Corporation, the Redmond, Washington computer operating system behemoth, announced it was laying off 5,000 employees and instituting other cost saving measures.  Of those 5,000, 1,400 apparently were laid off today at the Redmond headquarters.    

This news comes when Microsoft reported that it's earnings were less than expected for the 4th quarter, 2008.  However, what is important to note, they still performed quite well.

But if it isn't clear by now it may never be.  Our economy is in deep, deep trouble.  And I am beginning to wonder whether the proposals made by the Obama Administration are sufficient to self arrest the avalanche of news like today's layoffs at Microsoft.

Several days ago I wrote about banking institutions that are "too big to fail."  And I cautioned that anything that is too big to fail, whose collapse would have, according to some, catastrophic impacts on the global economy, should not even be allowed to exist.  Indeed, within the past week, we have seen the outgoing Secretary of Treasury deliver more federal money to two such banks, Bank of America and CitiCorp.  And the word is that both are still, essentially, insolvent.  

It seems that a wiser, more prudent use of our money may be for the federal government to start several smaller, regional banks.  New, healthy banks.  But to continue dumping federal money into cesspools where we haven't a clue where the bottom is, what kinds of assets they have, how much they actually owe other lenders, seems, well, bad banking.  We are making loans, or investing, in exactly what we don't want banks to be doing anymore.  So, while I understand the panic in the Obama Administration, of not wanting Bank of America or CitiCorp to fail in the first few glorious days of this Administration, perhaps a wiser course would be to just stop giving them money and begin creating new, more stable banking institutions who will act like banks rather than money sponges.  Creating new institutions while we watch the old, lumbering, banks fail, could be a very healthy idea.  Short of this, Obama just need to nationalize the banks, kick out the management, and well, maybe hire some of the 5,000 bright young stars from Microsoft to run them.  They need jobs.

The other fundamental problem is a trade issue.  Again, at the risk of becoming the Cassandra of the blogging universe, we can not keep importing and buying their stuff.  We have got to be creating, manufacturing, and exporting our stuff.  The so-called "new economy" has failed.  Let's be real about that.  And what did we really export anyway, credit default swaps?  The Lords of Wall Street who got us into this mess?  Yep, sure, they are advising China, India, Singapore on how to look just like us?  Come on!  

We have so gutted our manufacturing capability that it will take years and years to get that back.  But I think part of the deal this Administration has to make with private industry is if they want bail-out or stimulus money, they have to be American.  No call centers in other countries, no imported steel, concrete, or solar panels.  And if, because of all the trade agreements we have made this requirement is considered a trade barrier, well, tough.  The world feasted on our stupidity for a long time, it's had more than it's share.  Sounds tough, I know.

But Obama has to explain to other countries that if they don't want bread riots in their streets, America has got to get it's own economy on a sustainable basis, and that means reducing our trade deficit, developing well paying jobs here.

Pundits are saying much the same thing.  Obama promised to listen to all of us.  Hopefully he does, and soon.

Meanwhile, I'll keep my accounts in one the of "too big to fail" banks, because I am not sure there are any other solvent alternatives.

Roll Up the Sleeves

Today is the first day of President Barack Obama.  And while we celebrated yesterday, today is a day to get to work.

There was a fascinating article in Politico today, seven reasons to be healthily skeptical of this new President.  I think it is a good read and especially highlight the concerns about the lack of media oversight.  

Here is my list of priorities for Obama's first few months:

• The economy:  It seems to me while the federal government can not get the "fix" in place and cranking, it can outline, as soon as possible, exactly how it views the various proposals creating a healthy economy.  Much of the talk in Washington, DC is about the stimulus package, which mostly consists of tax credits and some modest infrastructure funding (not as much as every Tom, Dick, and Harry governor and mayor had hoped).  But the stimulus package, alone, will not "fix" our economic ruins.  We should also be hearing about re-aligning the banking industry, new standards on securities markets and securities issues, some form of taxation on excessive compensation packages to deter corporate leadership from managing their institution for short term gain only, a road map for reigning in health care costs as well as providing affordable care for 100% of Americans, and a plan for housing, employment, and affordable higher education.  Without looking at the economy holistically, all the policy makers will be doing is treating symptoms not the illness.
• War: Personally, I think it is unrealistic to bring the troops home from Iraq immediately.  Apparently President Obama is now looking to withdraw troops over the next 16 months.  Just trying to get material and people back to Kuwait for shipping will require some savvy logistical thinking (good thing that is what the military is good at...think Normandy).  On the other hand, Afghanistan seems to be the focus of much attention after being neglected during Iraq.  My fear is that we will become Afghanistan's next USSR.  As I understood our mission, we entered Afghanistan looking for al Qaeda, particularly the leadership responsible for recruiting, training, financing, and plotting the attacks on September 11, 2001.  Hopefully we will become more focused on that mission.  The President has already made steps to bring the United States back in line with international conventions on torture, and I applaud him for those choices.
• The Middle East: It goes without saying that the wars and relations in the Middle East are linked.  While it appears the Israeli attacks on the Gaza have stopped for the time being, truly it seems that each Administration inherits an even greater mess with even more barriers erected to finding a peaceful solution to Israel's sovereignty, Palestinian homelands, and Israel's relations with other Arab nations.  It's a priority only because it affects our interactions with other countries in the Middle East, as well, these days, with other Muslim countries.  
• Global Climate Change: I put this here because if I said the environment eyes would glaze over.  Global warming and global climate change have become the current jargon for talking about the environment.  But in reality, another way of looking at this issue is through economics.  How do we provide for people without trashing the Earth?  Thinking about the economy is holistic terms also means thinking about how we treat our land, water, vegetation, wildlife.  Which isn't to say we stop logging or mining, but how can we do these things in ways that we are not exporting our problems, providing jobs, and sustaining the natural world?  It's probably, to be frank, one of the easier problems for President Obama.  On the other hand, we have some tricky international issues regarding ocean based fisheries, where massive industrial fishing fleets have contributed to depletions of whole fishing stocks.  Many of those fish are just offshore of our boundaries.  
• The pup:  Ok, you made a promise to your daughters, Mr. President.  Get the puppy.  Your goal here is to fulfill a promise to your children, not please various interest groups who expect you to do what is politically correct.  And if you thought dancing late at inaugural balls was tough, wait until the puppy needs to hit the Rose Garden at 2:30 AM!

The Day Before

It's a gorgeous day here.  The sun is out, it's sort of warm.  People are taking the day off for Martin Luther King Day.  It's the day before the quadrennial American event: inauguration of a president.  

Tomorrow, a candidate who based his campaign on hope and change is sworn in.  It is America's first African-American president (however, not our first from Harvard a fact we Yalie's are slightly grumpy about).  At noon eastern standard time we will witness history.

I have talked a lot about the unimaginably hard problems that need immediate attention.  In fact, it seems Obama and Bush sliced up some territory after the election, with Obama taking on the economy and Bush still trying to wrangle international issues such as the war in Gaza.  But tomorrow, it all falls upon President Obama's shoulders.

In Washington, D.C. and many cities across the nation, people will be indulging in celebrations.  Hollywood stars and "very important people" are in DC for the see-and-be-seen events beginning on Sunday.  

But the real work has already begun.  Aside from the carefully scripted trips to Arlington National Cemetery, Walter Reed Army Hospital, painting a children's homeless shelter, the work of a president in jawboning banks to open up credit from money they received under the Troubled Asset Relief Program (TARP) to cajoling Congressmen to forgo their pet projects and throw their support behind more long term economic stimulus, is difficult.  It is work that we will not see but hopefully will begin to understand the impacts.  Symbolic acts are great set-ups for a re-election that is essentially two years from now, but we really need more than symbolic acts.  

Tomorrow will be history.  Wednesday will  be work.

Retail Therapy

No surprise in today's numbers, although, apparently Wall Street felt they were worse than expected.  But, as much as my "research friends" like to disrespect anecdotal evidence, if you were out and about during the holiday shopping season you would have known the retail sales numbers were going to be bad.  

The most impressive, so to speak, number is that retail sales are down slightly over 9% from December last year.  So while the down 2.7% from November may not seem like a lot, 9% does.  It says the recession has been going on for over a year before anyone in "officialdom" declared that we were technically in one.  

There are two things that concern me.  The fact that while we all knew something was wrong with the economy, policy makers had to wait until, what, some archaic and ridiculous formula told them something was wrong?  Is there something about fiddling while we are standing in the unemployment line about this?

But more importantly is the consumption issue.  Imagine a hamster in one of those wheels, running and going nowhere.  It seems to me that is what we are in right now.  Many pundits say there is a lack of confidence in the economy.  They refer to this lack of confidence regarding banks lending, investors who still have money, investing, and consumers spending on stuff.  Well, no kidding there is a lack of confidence.  We are watching in real time what many of us read about in history books.  Doesn't exactly instill confidence in our economy.

But seriously, what the pundits mean is that if only, somehow, consumers feel they have more money and banks feel they are not bleeding in bad loans and investors feel they will get at least a reasonable return, the economy will magically become healthy.  Thus, the stimulus.  The idea behind the stimulus checks the summer of 2008 was a belief that if consumers feel they have more money they will begin to spend and the retail sector which accounts for over 80% of our national economy (yes, you read that right) will bounce back.  I don't know about you, but somehow $600 didn't instill a lot of confidence.  Instead, Americans apparently did what they should have done, pay down debt or save the money!  So now the stimulus idea is to try the same thing, but with tax credits, in other words no cash, and to create some "shovel ready" jobs.  

Perhaps the idea being that if we think something is being done, we will I suppose, go out and spend money.

But here is the rub.  I don't think Americans have that much money.  Credit cards are tapped out and no one is getting refinancing loans on their homes to pay off the credit cards so they can go at Costco one more time.  And what savings Americans have left is not being touched out of fear that we may need it.  In other words, I don't think the issue is blithely about confidence, I think the issue is that deep down inside we don't really think the economy is working.

Relying, again, on the retail sector to bring the economy back into health is like pouring feel good drugs into a really sick patient and hoping by just getting him out of bed he'll make it a few more years.  

Now, I am a huge consumer.  Books, outdoor equipment, fly fishing stuff, food, did I say books?  So I don't advocate some Luddite lifestyle.  I love my toys.  But I also think our addiction to consuming is responsible, in part, for what got us into this mess.  And I think as a society we really need to just say no to the policy makers who continue to urge us, in less direct ways than President Bush did on September, 12, 2001, to go to the mall.  When President-elect Barack Obama encourages us to support his economic stimulus package, we need to think about whether the idea is to instill confidence to get us to spend money on yet another flat screen TV made in Viet Nam, or to provide employment for people that nurtures and instills a sense of purpose and confidence in their lives throughout their lives.  Because at some point, the hamster needs to get off the wheel.  We have to stop making the same mistakes and a reliance on the retail sector to pull us out of this recession is the same mistake.

And, as if to show I'm right (insert smile) a recent poll indicates that Americans have a very low confidence level of our federal government.  And that low confidence extends  into the future.  In other words, we think the system of more broke than the "mechanics" who are fixing it.  Scary.

Sustainable Economies

There are many things I never expected to write in one sentence.  The following is one of them: Pittsburgh, Pennsylvania may be an example of sustainable economies.  In a fascinating article from January 8, 2009 New York Times, Pittsburgh appears to have brought itself back from economic ruin when the steel mills closed and everyone ran from the city in the 1980s.

But the renewal of Pittsburgh's economy was not because of some instant "stimulus" but rather because of diligent efforts over years and years from dozens of sources to diversify the economy and to ensure that the region does not fall prey to boom and bust urges.

The down side to Pittsburgh's renewal has been a deindustrialization, which, I think, does a disservice to any economy.  Folks, we simply have to acknowledge that we need to make things.  It's one of the only ways for us to provide middle class jobs for skilled labor.

But much of the renewal of Pittsburgh came from retraining of steel workers.  And I think one of the most important elements of any "stimulus" plan has got to be a commitment to ensure we are providing employment, not just jobs, for people.  Hiring folks for construction jobs which may terminate when the bridge is built or for other infrastructure jobs is great as long as we are providing skills which can be translated into long term employment.  If we fail to do that, we are back at looming and chronic unemployment, which is, of course, not a good thing.

One  huge hurdle for any stimulus to work is the fact this economic melt down has crossed all sectors.  Journalists, mechanics from Boeing, aluminum workers, bankers, medical professionals, retailers, construction workers, real estate salespeople...and while education seems to so-far be insulated, we know that is not long.  Even the government, state, local, and federal agencies are at least in hiring freezes.  It is going to be very difficult to find areas where cash infusions are going to initiate long term employment.

In the meantime, maybe we need to really look at communities like Pittsburgh, long ago declared dead, rising from the ashes, and seemingly sustainable.

Tax Credits?

Several days ago, President-elect Barack Obama announced that he was including in his economic stimulus package tax credits.  An individual could get as much as $500 and a couple up to $1,000.  While I am no fan of paying taxes and believe that often our tax money is wasted (nope, I happen to think the DNA study on Northern Rocky Mountain Grizzlies was a good thing, but don't get me started on the things I think are a waste, like all the opulent offices for Members of Congress...)I am a little concerned about these tax credits.

As he was announcing the tax credits, President-elect Obama was also voicing his concern over the record deficits in our national budgets.  And of course, given the apparent need for Keynesian economics the national deficit will increase to levels unimaginable even a decade ago.  A brief econ 101 here: when the federal government has a budget with a deficit, they have to raise money to pay for things that are over and above the income (taxes) they bring in.  So, the government can either print money and cause inflation (think Zimbabwe with astounding inflation) or they can sell treasury bills, which is essentially borrowing money.  And the problem with borrowing money is that the federal government is, simplistically put, competing with us for a finite amount of lender's dollars.  If you're a lender, who would you rather lend to, the US government or a private business?  Deficit spending essentially inhibits private sector economic growth.  There is also that dicey moral issue of having our children, grandchildren, and great-grandchildren pay for our current services, since that is when the debt is paid off, many many years in the future.  Much less the issues surrounding who the government borrows money from: China, governments in the Middle East...

Ok, so giving tax credits will further increase the deficit.  

Many of my progressive friends object to the tax credit because it appears to be appeasing the Republicans, who they blame for this whole economic melt-down.  The reality is, in Washington, DC, policy is not made with out compromise.  And trust me, there are a lot of Democrats who also want a tax credit.

Obama justifies the tax credit as "putting money back into the pockets" of those who need it the most.  I disagree.  

Let me ask you, does the elderly woman who tries to get her prescriptions filled and is told the cost is over $600, she lives on Social Security and has to make a decision to eat or buy drugs, much less pay rent, transportation costs, utilities...you get the drift, does she even pay taxes?  Nope.  But could she use $500 cash to help pay some monthly bills?  Or more importantly, a whole revision of the so-called prescription drug benefit so our senior citizens are not put into embarrassing situations at the drug store.  Really, I believe the people who could use the tax credit the most are the people who don't pay taxes.  Poor people spend money (and hence stimulate the economy) because they have to.  Moderately well off people can take the tax credit and save it, thus not stimulating the economy, which is what we saw in the refund checks the summer of 2008.

As exhibited by the amount of time I spend on this issue, President-elect Obama has a huge nightmare on his hands.  Today I heard that for every available job in this country, 3.1 people are seeking it.  And that if, by the height of this economic melt-down, unemployment increases by 50%, it would make approximately 10 people seeking every job.  Those are scary numbers.  Clearly a whole range of policies must be implemented to prevent a national disaster, or at least mitigate the one we are in.

Without running the numbers, my guess is that legislating this proposed tax credit will not eventually cost the federal budget very much money, but it makes Obama sound reasonable, concerned about the middle class, and bi-partisan.  It is in a sense giving him money in the bank to perhaps ask Congress for subsequent measures which may be controversial, such as overhauling the health care insurance system.  

But the reality is it will not alone or even with his other proposals, be a significant stimulus to the economy.  It's just an example of how the games of politics are played.