NOVEMBER 2008 11/25/08Obama and Bush Working to Calm Volatile Markets, Jeff Zeleny, NY Times. Federal Reserve and Treasury to announce lending program. Obama to name his budget director, Peter R. Orszag, who held the job under President Bill Clinton, and is expected to outline budget reforms that call on Americans to make sacrifices. Mr. Obama said at the news conference here: "To make the investments we need, we’ll have to scour our federal budget, line by line, and make meaningful cuts and sacrifices.” Comment:Short-term stimulus, long-term need for cutbacks. A difficult message and difficult fiscal engineering. 11/24/08Opinion: The Fed Is Out of Ammunition, Christopher Wood, Wall Street Journal. In the U.S., the Fed cannot control the velocity of money. The dramatic collapse in securitization is intensely deflationary. the Federal Reserve balance sheet continues to expand at a frantic rate, as do commercial-bank total reserves in an effort to counter credit contraction. Comment: A good description of the challenge – but (1) the Fed and Treasury together have a seemingly unlimited power to lend money, (2) they are using this power to pursue "quantitative easing." Wood’s solution (he studied Japan in the 1980s and 1990s) is to let bankrupt companies fai. And he wouldn’t mind going back to the gold standard, but that genie is out of the boittle. 11/24/08Does Tech Density Mean Echt Destiny? Working Paper: Was the Wealth of Nations Determined in 1000 B.C.? Harvard Business School professor Diego A. Comin and colleagues find that technology adoption circa 1500 A.D., prior to the era of colonization and extensive European contacts, explains approximately 50 percent of cross-country differences in both current per capita income and technology in a large cross-section of countries. The paper. Comment: Don't miss good maps and data in the back of the paper. CityEconomist is doing some research on ancient technologies - see here and here.
11/24/08Planners to Consider S.F. Congestion Charge,San Francisco Chronicle. Making San Francisco the first city in the nation to combat congestion by imposing a toll on motorists who drive on local roads is "totally doable" said a top city transportation official deemed. View Images. But clearing the necessary political and public opinion hurdles is another matter . "We're going to have to get buy-in," said the executive director of the San Francisco County Transportation Authority. His agency, with the help of a $1 million federal grant, has been studying the feasibility of congestion pricing in San Francisco. Comment: This Federal program has leverage.
11/24/08Rubinomics Recalculated, Jackie Calmes, NY Times. It is testament to former Treasury Secretary Robert E. Rubin’s star power among many Democrats that the president-elect’s choices for his top economic advisers — Timothy F. Geithner as Treasury secretary, Lawrence H. Summers as senior White House economics adviser and Peter R. Orszag as budget director — are past protégés of Mr. Rubin, who held two of those jobs under President Bill Clinton. Comment: Like rebooting and going back to the last time the operating system seemed to work properly.
11/21/08NY Racing Stumbles Amid Weak Economy, AP via CrainsNY.Handleis down 4% to $527 million through October at New York's thoroughbred and harness tracks, compared with the same period in 2007, says the state Racing and Wagering Board (only Saratoga eked out a gain). Handle at OTBs dropped 6% over the same period to $1.58 billion, with NYC OTB, accounting for more than half the state OTB handle, dropped 8%. The American Gaming Association reported casino revenue was down nationwide by 4.6% in the third quarter compared with last year, yet harness tracks [all except Monticello Raceway] onsite video lottery terminals, or VLTs, [show] revenues up April-through-October versus 2007. The "racinos", particularly at Yonkers, seem to be taking business from casinos in Atlantic City and in Connecticut. Comment: These facts fit what CityEconomist learned at the World Lottery Association last month in Rhodes. The VLTs, like slot machines, tend to generate repeat playing and are more addictive than regular Lotto or betting on horses.
11/21/08Is It OK to Be Liberal Again, Instead of Progressive?Michael Lind, Salon. If the conservative era is over, can liberals come out of their defensive crouch and call themselves liberals again, instead of progressives? People like Rush Limbaugh had been equating "liberal" with weakness on defense, softness on crime, and "redistribution" of Joe the Plumber's hard-earned money to "Teenage Immigrant Welfare Mothers on Dope". Comment: It would be nice to have the good word liberal back in use again.
11/20/08Antiwar Groups Fear Hawkish Cabinet, LA Times. Since winning the White House, Obama has affirmed his pledge to remove the troops but has left himself some flexibility on the withdrawal timetable. In an appearance on CBS' "60 Minutes" on Sunday, Obama promised a troop pullback but described it in broad terms. "I've said during the campaign, and I've stuck to this commitment, that as soon as I take office, I will call in the Joint Chiefs of Staff, my national security apparatus, and we will start executing a plan that draws down our troops," the president-elect said. Comment: Antiwar groups naturally prefer Senators and Representatives who voted against the war in Iraq. But really, there weren't too many of them - 23 in the Senate and 133 in the House.
11/20/08Public Opinion on $700 Billion Bailout, Pew Research and CQMirroring the results of a Gallup poll earlier this week, a November survey by the Pew Research Center finds Americans about evenly divided on the $700 billion government bailout plan for financial institutions. Half of voters described themselves as angry about what they are hearing about the economy, 65 percent are depressed and, despite all that, 69 percent are optimistic. Comment: That’s not contradictory. Two-thirds are depressed because we got to this point deep in what seems best described as a Keynesian liquidity trap. Two-thirds are optimistic because we seem to be getting out. The problem is what’s likely to be waiting for us when we get out of the trap: Monster Inflation. 11/11/08In Honor of Veterans: The Story of Alan Seeger, YouTube. Seeger was one of the Yanks who volunteered to join the French and British forces after Kaiser Wilhelm II invaded Belgium and France in 1914 and before President Wilson declared war on the Kaiser in 1917. Watch a dramatization of the song of the French Poilu, the 1917 “Chanson de Craonne,” which was suppressed by the French Government. The lyrics: « Adieu la vie, adieu l’amour,/ Adieu toutes les femmes./ C’est bien fini, c’est pour toujours, / De cette guerre infâme. / C’est à Craonne, sur le plateau, / Qu’on doit laisser sa peau / Car nous sommes tous condamnés /C’est nous les sacrifiés ! » Finally, here is a dramatization of the song that the Tommies sang at the end of WWI. More famous is In Flanders Field (sung with video images), the poem by Canadian WWI medic John McCrae. I also love The Green Fields of France, a poignant song about the fallen WWI soldier Willy McBride. Comment: A tip of the hat to Tim Sullivan for sending me the first three links, and to soldiers, dead and alive.
11/10/08 The Test, Steve Coll, The New Yorker. [President-Elect Obama] has within reach at least two generation-spanning causes: the need to jump-start a new energy economy, and, in so doing, help to contain climate change; and the need to enact a plan to provide quality health care to all Americans, and, in so doing, complete the project of social insurance that Roosevelt described in 1935. Each of these projects is urgent, but health-care reform speaks more directly to the economic and human dimensions of the present downturn. The accumulating failures in the country’s health-care system are a cause of profound weakness in the American economy. A large number of the country’s housing foreclosures in recent years appear to be related to medical problems and health-care expenses. American businesses often can’t afford to hire as many employees as they would like because of rising health-insurance costs; employees often can’t afford to quit to chase their better-mousetrap dreams because they can’t risk going without coverage. Add to this the system’s moral failings: about 22,000 people die in this country annually because they lack health insurance. More, Comment: Reducing military spending in favor of increasing spending on alternative energy will work to improve the trade balance. The urgent task of increasing health-care coverage must be accompanied by a rationalization of the health-care delivery system.
11/10/08 A Quiet Windfall For U.S. Banks,Amit R. Paley, Washington Post. The financial world was fixated on Capitol Hill as Congress battled over the Bush administration's request for a $700 billion bailout of the banking industry. In the midst of this late-September drama the U.S. Treasury Department issued a five-sentence notice that attracted almost no public attention. But corporate tax lawyers quickly realized the enormous implications -- officials had just given American banks a windfall of as much as $140 billion. More. Comment: This giveaway is reminiscent of the December 2000 stealth rider that authorized credit default swaps and broke the last link between bank mortgages and investors in mortgage-based Collateralized Debt Obligations. The ugly story is beautifully written by Patricia Kilday Hart in the May 30, 2008 Texas Observer.
11/9/08 Obama Positioned to Reverse Bush Actions Like Stem Cell, Climate Rules.Washington Post, A16. President-elect Barack Obama's Transition Team has compiled a list of about 200 Bush administration actions and executive orders that could be swiftly undone to reverse White House policies on climate change, stem cell research, reproductive rights and other issues, according to congressional Democrats, campaign aides and experts working with the transition team. More. Readers' comments. Comment: For some purposes, changes happen before Day 1. For others, Congress needs to consent.
11/9/08 What President Obama Means for NY,Crains NY.Barack Obama's urban-centric policies will be a help to the NYC area, but his tax plan could more than offset the potential benefit from some of his other policies.What will Barack Obama's presidency mean for New York? The Democratic president-elect has pledged to take a bipartisan approach, which suggests no special treatment for blue states. Still, New York should benefit from the election of the nation's first modern president with an inner city background. More.Comment: President Clinton imposed an income tax surcharge on people earning more than $200,000 a year, and half the people affected were from the NYC region. NYC did well under the Clinton presidency because the nation was better managed economically and was more prosperous than under Bush 41 or Bush 43.
11/7/08 Senate Finance Chair to Release Early Health-Care Goals, Options, CQ Midday.Senate Finance Chair Max Baucus, D-Mont. today said he would release a list of health policy options next week. Baucus is a centrist who works closely with Finance Republicans. Finance controls policy for health-insurance-related issues. Baucus helped write the 2003 Medicare prescription drug law.The HELP Committee shares jurisdiction with Finance over health care overhaul. Comment: One of President-Elect Obama's top priorities is expanding health insurance coverage to as many people as possible, starting with all children. A Federal program would help states and localities with health-care costs (Medicaid etc.), a major source of budgrt growth at a time of declining revenues. Incentives to keep down costs would be important.
11/7/08Unemployment Rose to 6.5 Percent in October, Highest Level Since 1994, BLS. In October, the unemployment rate rose from 6.1 to 6.5 percent, highest in 14 years, and the number of unemployed persons increased to 10.1 million. Construction employment declined by 49,000 over the month. Since its peak in September 2006, employment in this industry has fallen by 663,000. Most of the declines over this period occurred in residential specialty trades (-349,000) and in residential building (-199,000). Employment in financial activities declined (-24,000) in October; credit intermediation, which includes banking, accounted for about half of the loss. The securities industry shed jobs (-6,000) in October, following a loss (-9,000) in September. The employment-services industry, which includes temporary help agencies, continued to contract in October (-51,000) and has lost about half a million jobs since the most recent peak in August 2006. A bright spot for employment was health care (+26,000 in October and +348,000 over the past 12 months), which continues to grow as a share of GDP. Mining-drilling also grew (+7,000); since a low in April 2003 its employment has increased by nearly one-half (+246,000). Comment: The bright spots are from the rising cost of health care and higher cost of oil (allowing more drilling), which have associated higher costs in the consumer budget.
11/7/08States Try to Stem Losses in Public Pension Funds, USA Today and redOrbit.As the volatile stock market eats away at the assets of public pension funds, some states are moving aggressively to mitigate their losses. - Some are raising the amount that employers and employees contribute to traditional pensions, which guarantee a set monthly payments, based on employees' salary and job tenure, in retirement. - Others are freezing benefits or scaling back cost-of-living adjustments. The moves come amid states' ballooning budget deficits. Pensions' poor investment performance threatens to aggravate states' fiscal woes because the shortfalls must sooner or later be covered from taxes. More.Comment: States and localities need to compare investment performance with expectations. The longer states take to recognize losses, the more difficult it will be to make adjustments to ensure that the money is there for retirees.
11/6/08Global Cities Rankings, Foreign Policy Magazine, November-December 2008. The Global Cities Index ranks cities’ metro areas according to 24 metrics across five dimensions: (1) Business activity: including the value of its capital markets, the number of Fortune Global 500 firms headquartered there, and the volume of the goods that pass through the city. (2) Human capital, or how well the city acts as a magnet for diverse groups of people and talent. This includes the size of a city’s immigrant population, the number of international schools, and the percentage of residents with university degrees. (3) Information exchange—how well news and information is dispersed about and to the rest of the world. The number of international news bureaus, the amount of international news in the leading local papers, and the number of broadband subscribers round out that dimension. (4) Cultural experience, or the level of diverse attractions for international residents and travelers. That includes everything from how many major sporting events a city hosts to the number of performing arts venues it boasts. (5) Political engagement—measures the degree to which a city influences global policymaking and dialogue, by examining the number of embassies and consulates, major think tanks, international organizations, sister city relationships, and political conferences a city hosts. New York emerged as the No. 1 global city this year, followed by London, Paris, and Tokyo. Comment: What I find most useful about ranking cities, having done a fewofthemmyself, is the potential for recognizing effective mayors and laggards. But to be useful for this purpose, the rankings must focus on what has changed and measure success. It’s no surprise to find London, New York, Paris and Tokyo as global cities. But what are mayors there doing that is making them more attractive or less attractive? Or do their stars rise and fall randomly? 11/05/08Wall Streetwalkers - the Sleazy Lehman Brothers Subsidiary, Graham Rayman, Village Voice. Lehman Brothers maintained its squeaky-clean image by relying on its seamier subsidiary. Just call her Aurora. Lehman Brothers CEO Dick Fuld told Congress on October 6 that the Wall Street investment bank was destroyed by a "financial tsunami"—a natural disaster, an act of God. In other words, it wasn't his fault. But the truth is that Lehman's fall in the subprime-mortgage crisis was a man-made disaster. Comment: The 1999 act was only a piece of the deregulatory breakdown and may have been less important than an ugly 2000 law beautifully described in a May 2008 Texas Observer article. The law authorized collateralized debt obligations: <<In the early evening of Friday, December 15, 2000, with Christmas break only hours away, the U.S. Senate rushed to pass an essential, 11,000-page government reauthorization bill. In what one legal textbook would later call “a stunning departure from normal legislative practice,” the Senate tacked on a complex, 262-page amendment at the urging of Texas Sen. Phil Gramm. There was little debate on the floor. According to the Congressional Record, Gramm promised that the amendment—also known as the Commodity Futures Modernization Act—along with other landmark legislation he had authored, would usher in a new era for the U.S. financial services industry.>> The new era was nothing to brag about.
11/5/08What Marketers Can Learn From Obama's Campaign, AdAge. Nov. 4, 2008, will go down in history as the biggest day ever in the history of marketing. Take a relatively unknown man. Younger than all of his opponents. Black. With a bad-sounding name. Consider his first opponent: the best-known woman in America, connected to one of the most successful politicians in history. Then consider his second opponent: a well-known war hero with a long, distinguished record as a U.S. senator.Obama owns the 'change' idea in voters' minds. It didn't matter. Barack Obama had a better marketing strategy. "Change" - the "big truth." If you tell the truth often enough and keep repeating it, the truth gets bigger and bigger, creating an aura of legitimacy and authenticity. Comment: High praise from AdAge. But it wasn’t just marketing. 11/4/08 (11:07 pm) Obama Won, CNN.Sen. Barack Obama has been elected the next President of the United States, the first African-American. Sen. John McCain congratulates Obama on his "historic" election as president of "the greatest nation on Earth." Comments: The United States has elected the son of a Luo as its President before Kenya has. For the fifth election in a row, the candidate with the stronger military background has lost. McCain’s concession speech was the best speech of the year (or am I just biased?). 11/4/08Biggest Turnout since 1920, MSNBC. Americans were voting in numbers that have not been matched since women were first given the vote after the Ratification of the 19th Amendment in 1920. Turnouts reportedly have approached 90 percent in Virginia and Colorado and have exceeded 80 percent in Ohio, California, Texas, Missouri and Maryland. 11/4/08 How Obama Won: Economy Was Top Issue, AP and Crains NY. Interviews by the AP, in person and by phone, of a panel of 10,000 voters show six in ten women backing Obama and men leaning toward him by a small margin. A slim majority of whites supported McCain. The survey showed the economy was by far the major electoral issue. Six of ten voters said so, and none of the other top issues (Iraq, energy, terrorism and health care) was picked by more than one of ten voters. Comment: Running a federal budget deficit in the next few years has been made harder by the fact that the United States has been borrowing excessively. Foreign lenders have enough of our debt. But a deficit will be required to dig the country out of what Hilary Clinton has called the "ditch" we are now in. 11/4/08Bloomberg to Announce Big NYCCuts, AP. Mayor Michael Bloomberg is canceling the police academy's next class, cutting hundreds of jobs, closing dental health clinics for poor children and taking other drastic steps to tighten the budget amid an economic slowdown. A Bloomberg administration official said the mayor will outline those cuts and others on Wednesday when he gives an update to the $59 billion budget. He will announce the city is reducing its work force by more than 3,000 employees: 500 through layoffs and the rest through attrition. Comment: There is no way to avoid cuts. What will help the City of New York is Sen. Obama’s proposal for a national program that will pick up more costs for health-care services - starting with children.
11/3/08Why Baby Boomers Will Need to Work Longer, Knowledge @Wharton. There is only one realistic way to prevent aging boomers from experiencing a significant decline in their living standards and becoming a multi-decade drag on US and world economic growth. Boomers will have to continue working beyond the traditional retirement age, and that will require important changes in public policy, business practices, and personal behavior. These adjustments have become even more urgent with the recent financial turmoil, which has sharply reduced the home values and financial investments of millions of boomers just as they approach retirement. For decades, boomers swelled the ranks of the US labor force, driving up economic output as they earned and consumed more than any other generation in history. Now, U.S. labor-force-participation rates are declining. Comment: That means corporations will need to plan for workers staying on past 62 or 65. One possibility: shorter-day, shorter-week or shared-job options for older workers?
11/1/08Nukes Cost Too Much, Says Brown, One World.net.Nuclear power is risky, says Lester Brown, president of the Earth Policy Institute, and it is burdening taxpayers with hidden costs - from construction of nuclear plants, disposal of nuclear waste, decommissioning of old plants, and security in case of an accident. Wind energy is half the cost even before add-ons. He says the U.S. government should stop spending $70 billion a year on nuclear power, and instead invest it in R&D for renewable energy. Other environmental groups - the Center for American Progress, Greenpeace and the Worldwatch Institute - also support multibillion-dollar U.S. "green-jobs" programs including renewable energy R&D. Comment: The predominant environmentalist position in the 1970s, based on work by the Council on Economic Priorities and others, was that the cost was higher than admitted by nuclear-energy proponents. Safety issues are not as worrisome as they were in the 1970s. But the costs still are. Plus ça change.
11/1/08UK Home Care Program Improves Seniors' Quality of Life, Saves Money, Phil Hope, UK Care Services Minister. A £60 million (approx. $96 million) UK program to keep seniors in their homes more than pays for itself by keeping them out of hospitals and nursing homes. Since 2006, Partnerships for Older People Projects (POPPs), targeted at those most at risk of hospital admission, has been doing shopping or gardening for them and making sure they get help collecting and using prescriptions. So far, (1) 100,000 people have been helped by POPP in 29 pilot sites, (2) POPP has improved the quality of elders' life (more mobility, easier washing/dressing, less pain/anxiety), (3) For every £1 spent on POPP, 73p is saved in the cost of emergency hospital bed-days, contributing to reducing the cost of care by £410 (approx. $656) per person. More (News).POPP Report).Comment: This study has similar findings to the 1995 Net Loss: Secondary Effects of Budget-Cut Proposals on the NYC home care program.
NOVEMBER 2008 11/28/08 (HuffPost)Ghosts of Transitions Past.President-elect Obama appointed old hands to his top economic posts, explaining Wednesday that "the vision for change comes... from me." That's a way to deal with a central problem of transitions, dysfunctional tendencies. An expert on this is Carl M. Brauer, whose Presidential Transitions: Eisenhower through Reagan (Oxford University Press) highlights the dangers that should concern Obama's transition staff, assuming they have time for anything but ranking resumes. Here are Brauer's five worries:Read Post.
11/16/08 (HuffPost)Stiglitz on War Cost, Economic Outlook. Economics Nobel Laureate Joseph Stiglitz spoke Friday at a fundraiser for Economists for Peace and Security (EPS), which was created to study the "full costs of war and conflict." He has a lot to say about the economic cost of military spending and the outlook for the U.S. economy. Joe is introduced by EPS Chair Jamie Galbraith. The room is full and buzzing. More.
11/11/08 (HuffPost)A Salute to Those Who Have Fought for Us. On Veterans Day we salute those who have served in the U.S. Army, Navy, Air Force, Marines and other services. The poppy became a symbol of World War I dead and Armistice Day because of In Flanders Fields, the poem by the Canadian John McCrae who was a battlefield physician in Belgium in 1915. Our honoring of Veterans Day suffers by comparison with Memorial Day, which has a similar purpose and is more widely observed as a holiday because it starts the U.S. summer season. Memorial Day also dates back further, to 1866 when a memorial was first held in Waterloo, NY to honor dead Union soldiers. Our honoring of this day is also not what it is in Europe, where the tragedy of World War I is still a painful memory, so many young men having been killed senselessly. Their memory is evoked by The Green Fields of France, a poignant song about the fallen soldier Willy McBride. More.
11/5/08 (HuffPost)Obama's Branding Genius. A month ago I posted an analysis from my friend Patt Cottingham that gave seven cogent reasons why the Obama brand was better than the McCain brand. See Brand Expert Scores Obama v. McCain 7 Ways. Well, AdAge is convinced by the outcome of the election and announced today that yesterday, November 4, is the most significant day for marketers in the history of the world. Wow. AdAge's Al Ries gives President-Elect Obama the marketing prize for the "Change" theme. Here's the picture that set them off (as if you needed to see another):
The Obama branding gets high marks on three criteria: 1. Simplicity. About 70 percent of the population thinks the country is going in the wrong direction. Hence a smart focus on "change." 2. Consistency. Most advertisers try to "communicate". They should be trying to "position" consistently. 3. Relevance. "If you're losing the battle, shift the battlefield." Obama forced his opponents to devote much of their campaign time discussing changes they proposed for the country and showing why they were different from Obama's. 11/3/08HuffPost)NY Phone Bankers for Obama. New York State is a safe bet for Obama. The NY State delegation in the House of Representatives splits 23-6 for Democrats and may shift to 27-2 in the next Congress. The NY State Senate, Republican for 69 of the last 70 years has a one-vote GOP majority and eight Republican seats are being strongly challenged. So New Yorkers, who like to target their energy where the payoff is greatest, are traveling in substantial numbers to Pennsylvania and other states where the races are close. And they are phone banking in droves. Typically the phone-bank volunteer signs up by web site/email (ny.barackobama.com/last call) or by phone (866-611-6447) for one or more two-hour time slots. More.
11/2/08 (Blogspot)Marathon Waste. The NYC Marathon today is going to produce 130 tons of waste. This year the NY Road Runners Club is recycling the gallon jugs used for dispensing water. They didn't used to, and the jugs were thrown out with NYC's waste. The Road Runners are looking into charging runners a license fee to be auctioned off the way seat-license fees are auctioned off by the Jets. If the runners are willing to pay such a fee, some part of the revenue should be allocated to making the NYC Marathon a model of waste reduction and recycling.
Window Sign in NYC, November 4, 2008
Obama Supporters, Nov. 4, 2008
Election Day Victory Speech, Chicago
David Axelrod, Chief Strategist
Barack and Michelle Obama, Election Night
David Plouffe, Campaign Manager
Phone Banking, 14th St., NYC, Nov 3
OCTOBER 2008 10/31/08A Push to Rid WTC Site of Illegal Vendors, Tribeca Trib.The tourist-intensive perimeter of the World Trade Center is a magnet to sellers like these, ever on the move to find new buyers—and avoid being caught. It is a ceaseless game of cat and mouse in an area that is supposed to be off limits for vending of any kind. Last month, a new push was launched to put a stop to it. “We don’t think there should be a three-ring circus where profiteers are cashing in on one of the worst tragedies to befall the United States of America,” Manhattan Borough President Scott Stringer said last month. A three-week investigation by Stringer’s office, released last month, found that an average of 15 vendors set up [illegally] in the zone daily, with as many as 53 sighted in a single afternoon. In his report, Stringer called for far stiffer penalties (for a first offense, licensed vendors are fined $50, unlicensed vendors $250). He also suggested a multi-agency oversight group to coordinate licensing of legal vending and draft enforcement plans, as well as distribute maps and flyers detailing vending rules. Comment: Another good Stringer initiative.
10/31/08How to Control U.S. Health Spending, Karen Davis, New England Journal of Medicine. Among industrialized countries, U.S. health care spending is uniquely high and yet fails to cover large groups of Americans. To rein in spending (and permit more coverage), U.S. officials should: (1) Compare costs and benefits systematically, as Britain and Australia have done. (2) Adopt the best health-information technologies. (3) Introduce more patient-centered medical homes for primary care. (4) Negotiate pharmaceutical prices. (5) Bundle hospital and physician services for episodes of acute care. More. Comment: U.S. health-care spending heading for one-fifth of our GDP. Yet the U.S. health-care system ranked 37th in the world on the WHO scale in 2000. About 45 million Americans are uninsured. The president-elect must make extending coverage while controlling costs a major priority of his administration. Karen Davis has provided a thoughtful guide to what needs to be done
10/31/08. NYC Marathon Eyes Personal 'Feet' Licenses, Bloomberg. The NYC Marathon organizers, the NYC Road Runners Club, are thinking of imitating the NY Jets’ auction of seat licenses via Stubhub.com. The Marathon is thinking of an online auction of rights to run. The 39,000 runners training for Sunday’s ING NYC Marathon should consider that next year it may cost more than a $180 entry fee to get into the world's most popular marathon. Comment: This year the plastic water jugs are being recycled - they used to be sent out with the trash. The Marathon generates 130 tons of trash that is swept up by 200 sanitation workers. With its increased revenues, could the NYC Road Runners think some more about how to reduce the amount of trash left for the City of New York to handle?
10/29/08A Billion Here, A Trillion There: the Cost of Wall Street's Rescue. How will the U.S. pay for propping up the financial sector? Answer: by borrowing. How will the ballooning U.S. budget deficits and debt affect the economy and financial markets? Guidelines such as interest rates and the ratio of debt and deficits to GDP suggest the new debt will be digested easily. But some experts warn that obligations are piling up like tinder on a forest floor. More.Comment: There is a limit to what foreigners will lend, especially after the Panic of 2008. Forget guidelines when our trade deficit is rising. It's a matter of how much U.S. debt we can sell overseas.
10/29/08Hamptons Home Prices Fall in 3Q, Crains NY.The average third-quarter price of a Hamptons house fell to $1.5 million, down 29 percent from the third quarter of 2007. The number of house sales dropped to 257 in the third quarter, down 29 percent from the same quarter a year-ago, according to a Prudential Douglas Elliman report. These declinesare steeper than the 7 percent dip in Manhattan, the 11 percent drop in Queens, or the 5.6 drop in Brooklyn over the same time period. It is becoming harder to get mortgages and some would-be buyers are losing their jobs. More.NYC Metro Vacancy Rate: 17.6%Long Island Housing Prices Fall in 3QComment: It is becoming harder to get mortgages and some would-be buyers are losing their jobs. The impact on the budget of the Town of East Hampton and on Suffolk County will be severe because assessments will need to be lowered or will be challenged in large numbers.
10/29/08Lawmakers Urged to Help Cover States’ Budget Shortfalls,CQ Politics.State and local officials facing budget shortfalls urged the Ways and Means Committee Wednesday to include billions of dollars in state aid in a post-election economic stimulus package and open up the financial industry bailout plan to state and local authorities struggling to find buyers at a reasonable interest rate for their tax-exempt bonds. Comment: Access to muni markets is reopening, but interest rates are high because the bond-insurance agencies can't doi their AAA magic so easily any more. Tragic collateral damage. 10/29/08Paterson Warns of Large Deficit and Painful Cuts, NY Times. Gov. David A. Paterson said Tuesday that the state’s budget deficit had swelled to a projected $47 billion through FY 2012 and the state must end its excessive spending. He projects NY State will lose 160,000 private jobs by the end of 2009, and face sharp drops in income-tax and corporate-tax revenue. Mr. Paterson said a $12.5 billion gap has opened for FY 2010, which begins on April 1, 2009. He expects deficits of $15.8 billion for FY 2011 and $17.2 billion for FY 2012. Comment: Unlike the Federal Government, New York State is not permitted to run deficits. NY State faces projected gaps between revenues and spending. The gap must be closed either by raising revenues (usually by raising taxes), reducing spending (the most reliable appropach), or borrowing. The New York City fiscal crisis of the mid-1970s was caused by short-term borrowing to close operating-budget gaps and this is forbidden at the City and State levels. 10/28/08Paterson: NY State Fiscal Woes Deepening, AP via CrainsNY. Gov. David Paterson says this year's NY State budget deficit is about $1.5 billion — more than the $1.2 billion he projected a few weeks ago. He says nothing will be off the table when the state Legislature meets on Nov. 18 to address the crisis. Comment: The problem is huge and gets worse next year and the year after that. The easiest option in a crisis, issuing bonds, will be costly in risk-averse financial markets. The Federal Government can be helpful in the near term but it will surely require NY State to make difficult structural changes because state and local fiscal problems are acute across the country (see October 19 LA Times story below). 10/20/08Mortgage Firm Tied to McCain Arranged Stealth Campaign To Crush Regulation, AP.Freddie Mac secretly paid a Republican consulting firm $2 million to kill legislation that would have regulated and trimmed the mortgage finance giant and its sister company, Fannie Mae, three years before the government took control to prevent their collapse. Comment: This belies a campaign theme that Freddie and Fannie were coddled by Democrats.
10/19/08States Face New Budget Shortfalls, LA Times.Economists worry that shriveling tax revenues may signal the onset of a historic fiscal crisis for state governments. Pared-down spending plans crafted just months ago may have been just the start. The moribund economy is drying up tax revenues more dramatically than expected, forcing 22 states, including California, to confront growing budget gaps. Some states have already eliminated jobs and services -- and more cuts are likely. The new shortfalls -- totaling at least $11.2 billion -- come just months after numerous states enacted belt-tightening measures while writing their yearly budgets. Officials also adjusted their revenue projections downward to account for the slowing economy. But in many cases, the actual revenue for the first quarter of the fiscal year, which began July 1, has proven to be even lower. Comment: When the Feds run deficits, they can just borrow more. States and localities cannot. 10/16/08Guided by an Invisible Hand, Joseph Stiglitz, New Statesman (UK). Make no mistake: we are witnessing the biggest crisis since the Great Depression. In some ways it is worse than the Great Depression, because the latter did not involve these very complicated instruments - the derivatives that Warren Buffett has referred to as financial weapons of mass destruction; and we did not have anything close to the magnitude of today's cross-border finance. The events of these weeks will be to market fundamentalism what the fall of the Berlin Wall was to communism. Last month in the United States almost 160,000 jobs were shed - making more than three-quarters of a million this year. My guess is that things will get considerably worse. I have been predicting this for some time, and so far, unfortunately, I have been right. There are several reasons for my pessimism. Comment: What couldn’t continue, hasn’t continued. The result is pain now and more pain later.
10/10/08Diversified Portfolio Provided Some Cushion as Markets Started to Tumble, But Concerns Remain, City Hall News, Joshua Cinelli. When teachers lay down the chalk and move out of the classroom, will they receive their pension in full? How about police officers and firefighters? That is the question public employees have been asking as the stock market reeled with the recent collapse of investment bank giants and government-sponsored enterprises. The value of the New York City pension funds' assets fell from $112 billion to $105 billion over the past fiscal year, according to the city comptroller's office. Unlike private sector funds, which can be insured, shortfalls in the public funds would fall on city taxpayers. According to Adam Blumenthal, a managing partner at Blue Wolf Capital Management and a former first deputy comptroller for Bill Thompson, there is no cause for major concern-at least not yet. "The markets are volatile at the moment and the pension funds are going to bounce around," he said. More. Comment: The NYC pension system "restart" in 1999 locked in market gains and for purposes of budgeting benefits assumed an 8 percent return from the new base. Shortfalls from this return are covered from the NYC budget, creating pro-cyclical hits to the NYC budget, partially offsetting the valuable counter-cyclical structure (i.e., averaging of assessments over five years) of NYC's property tax. (Another issue, the adequate funding of pension benefits, gets back to the broader question of appropriate accounting and reporting principles for the liabilities of U.S. pension funds.)
10/7/08Fiscal Report Sees ‘Great Trouble’ Brewing for States, Stateline. Arizona, California, Florida, Michigan, and Rhode Island currently are suffering the most from worsening U.S. economic problems, but Connecticut, New York, New Jersey and other states will soon be in the same boat. In its latest quarterly report on state tax revenues, the Rockefeller Institute of Government warned Tuesday (Oct. 7) that “great trouble is brewing” for states as economic distress spreads from Wall Street. “Superficially, tax collections appeared to be doing okay — certainly not the leading edge of a fiscal crisis. But below the surface, great trouble is brewing,” report author Donald Boyd said. On top of the deteriorating revenue outlook, Boyd said the prices that state and localities pay for goods and services rose 6.6 percent during the second quarter. Comment: The rise in prices of things that states and localities pay for is higher than economy-wide inflation by the largest margin in 60 years. 10/7/08Manhattan Office Vacancy Rate Hits 2-Year High, Crain's New York. Report sees vacancies rising as financial firms cut back. Comment: Consolidations and layoffs in the financial community are taking their toll. This is surely a beginning of a contraction of space needs, not the end.
10/6/08Making Some Sense of $700b, James Carroll, Boston Globe. The annual American military budget is at least 10 times larger than the military budgets of Russia and China; it is 20 times larger than the entire budget of the US State Department. [T]he historic financial rescue figure throws an entirely new light on the nearly identical number that will fund the Pentagon for one measly year. [S]pending money on war planes, missiles, and exotic weapons systems, not to mention combat operations, creates far less social capital than spending on education, bridges, mass transit, new forms of energy - even the arts. The genius of this nation's most brilliant minds has been yoked for more than half a century to the invention of ways to kill and destroy. What if those minds had been put to work imagining alternative futures - the rescue of the environment, the ending of disease and poverty, the artistic fulfillment of new media, the teaching of children? It's a question as old as Eisenhower ("The cost of one modern heavy bomber," he said in 1953, "is this: a modern brick school in more than 30 cities.") Comment: The U.S. bill is a maximum of 22 percent of the $1.9 billion UN budget, i.e., about $400 million. (Japan contributes three times as much per capita.) There is also a U.S. bill for 27 percent of UN peacekeeping costs. Total world military spending is $1.5 trillion, nearly 1,000 times the regular UN budget. If U.S. military spending were capped at its share of the UN budget, it would be about $350 million – a reduction of 50 percent from current defense spending,
10/6/08Financial Crisis Takes a Toll on Already-Squeezed Cities, New York Times, Susan Saulney. After the layoff of 160 full-time and part-time city workers, the slashing of recreation programs and a call for volunteers to shelve books at the branch libraries (open two days a week now instead of six), the people of Duluth, Minn., thought they had seen the worst of a bad year for the municipal budget. To help close a gap of more than $6 million that yawned open over the summer, the artsy shipping city on Lake Superior had considered selling its prized Tiffany stained-glass window depicting Longfellow’s American Indian character Minnehaha, a one-of-a-kind work donated by a civic group more than 100 years ago. And some even pushed forward with plans to sell valuable beachfront property along the lake. The city had options, things were looking up. But then Wall Street struck. With tax receipts from retail sales and property values plummeting as unemployment rises along with fuel costs, city officials in Duluth and across the country say they are feeling increasingly squeezed and helpless as the national economic crisis eats away at the core sources of municipal revenue. Add to that the abrupt and unexpected loss over the last several weeks of usually sound investments and credit in the municipal bond markets — the place to which local governments turn for relatively cheap, fast money — and it becomes clear that cities are facing their own financial crisis, arguably the worst in decades. More.Comment: "When trouble comes, they come not as single spies but as battalions." (Hamlet, IV:v.)
OCTOBER 2008 10/29/08 (Blogspot)Needed: Washington Response to the State and Local Fiscal Crisis. An early issue for the new president is the fiscal crisis facing state and local governments. Beleaguered officials have watched July-September revenues come in lower than expected while financial markets have become more risk-averse. These officials are lobbying Congress for help - expect the heat to be turned up after the election. The Federal Government is the only one of America's 87,500 governmental units that can print money, although that trick gets harder to play each time. A Federal response could be to provide short-term fiscal assistance in exchange for commitment for structural changes that will bring state and local revenues and expenses into balance and will bring debt service below a reasonable ratio to a multi-year average of tax revenues. It's not just that states and localities have seen revenues decline. Many pension funds that have invested heavily in equities and a year ago seemed to have adequate funds to pay pension obligations now look grossly underfunded. More.
10/27/08 (HuffPost)McCain Fails on Economy - Poll. A 54 percent majority of more than 200,000 respondents to an AOL poll think John McCain can still win on November 4, eight days from now. Respondents attribute his second-place standing to the weak U.S. economy. The poll asks: "What should a McCain comeback strategy focus on most?" Of 180,000 respondents to this question, 54 percent believe he should focus on economic solutions. Only 19 percent say McCain should focus on his experience. Only 18 percent say he can succeed by attacking Obama. Only 9 percent opt for some other formula for a McCain victory. More economists are forecasting a deep global recession and the markets agree. The Hang Seng index fell as much as 15 percent this morning, more than on any day since the Tiananmen Square incident in 1989. More. 10/19/08 (HuffPost)Dubya Had the Heat Turned Up in August. A valuable news report can have a misleading headline that the reporters (off the record) disavow. The excellent graphic in the New York Times yesterday was headlined with a question: "Can a President Tame the Business Cycle?" This is like asking: "Can a President End Poverty?" They are both misleading questions leading to an inappropriately negative answer. The chart depicts the consequences of the economic policies of recent presidents. It shows what an economic disaster Dubya's administration has been, borrowing heavily (he ended the surpluses of the Clinton years) and discouraging saving with continued low interest rates and unchecked rising asset (especially housing) values. More.
10/13/08 (City Hall News, New York: Op-Ed)How the Mayor Can Really Help Create New Jobs.Dr. John Tepper Marlin: “I don't know what I do next," a mid-career Lehman Brothers worker told me last week. "Barclays doesn't want my unit. Maybe I should start up a business." Nearly 30 years ago, Mayor Bloomberg did just that. He left Salomon Brothers in 1981, during the recession of 1981-82, and he turned his $10 million severance check and Salomon shares and his insights into the value of technology to Wall Street into a giant company with more than 9,000 employees concentrated in the New York City area. Now, to replace jobs being lost in financial services, New York City needs to repeat that many times. More.
10/13/08 (HuffPost)Gordon Brown's Trumpet. The first sound was a muffled rat-a-tat as the rise in housing prices in the first half of the millennium's new decade triggered concern about a bubble. The drum roll became more menacing in 2007 as housing prices plunged in many areas and foreclosures rose. When problems arose in credit markets, polychords rose above the drums. More.
10/8/08 (Blogspot)Letter from London - Big-Bang Bug for British Banks. It has come to this. Big Bang was to open up UK financial markets to stop grousing by Oxford-Cambridge graduates about the higher earnings of their Wall Street cousins. But opening up the UK markets also allowed in the U.S. subprime-CDO-CDS virus that laid low many U.S. institutions and now has more UK victims. Europe's more regulated financial sector has been relatively immune to the disease. How the right and the left do converge in such a crisis. Dubya's administration with Phil Gramm's leadership was engaged in a methodical deregulation of the financial markets. But it showed no hesitation about swiftly seizing the commanding heights of the mortgage lending and investment banking industries. In Britain, Gordon Brown's Labour Party - ideologically far more prepared to turn its banks into government bureaucracies - delayed taking action but is now buying equity in its banks. The Financial Times calls the bank bailout a "part-nationalization". Newspaper headlines this morning focus on a £50 billion UK bank bailout, referring to capitalization aid, with later issues using a £500 billion figure to take account of purchase of securities.
10/7/08 (Metro New York)Meltdown Gives, Patrick Arden. New York. Protesters banged pots and pans yesterday outside City Hall, in opposition to the mayor’s redevelopment plan for Willets Point. They wanted half of the 5,500 new housing units to be set aside as affordable, but some observers wondered whether the mixed-use project was now doomed by the current economic crisis. “Willets Point is in trouble,” said John Tepper Marlin, the former chief economist for the city comptroller’s office from 1992 to 2006. The city is facing leaner times, he said, “and we already spend 16 percent of our revenues on debt service.” The mayor has called for a third term to finish his big plans, but Marlin asked, “Who knows which of Bloomberg’s projects will survive?”
10/2/08 (New York Times)Mayor’s Stewardship Is Mixed, Fiscal Experts Say, David W. Chen and Michael Barbaro. Mr. Bloomberg prepares to announce on Thursday his plans to seek re-election, he may well be volunteering for the ultimate test of his financial skills — managing New York City in the middle of a global financial crisis and in the face of some potential fiscal problems he may well have contributed to himself. “I would say it’s a bigger economic challenge for him than Sept. 11,” said John Tepper Marlin, chief economist for the New York City comptroller’s office from 1992 to 2006. “It’s not just New York City — it’s a whole system in trouble. Yet it’s our residents and our workers who will be affected.”
10/2/08 (Wall Street Journal)Prospects Brighten for Bloomberg's Green Agenda If NY Mayor Changes Term Limits, Nathan Koppel and Dionne Searcey. Many in the financial community support the prospect of a third Bloomberg term, believing the mayor, the founder of business-information service Bloomberg LLP, is better positioned to engineer a turnaround than other potential candidates. He not only has the experience of an incumbent, they say, but also deep ties in the business community and government. "Bloomberg moves at a very high level and has good access to Washington, D.C.," says John Tepper Marlin, the former chief economist for the city's comptroller's office from 1992 to 2006, who notes that the federal government will be an increasingly important source of funds for New York. "He has a lot more clout than other mayoral candidates."