Friday, December 26, 2008

Remembering Kitt, Appreciating Warren

December 26, 2008, 7:00 a.m.; December 27, 2008, 5:00 a.m. (addition of AP's Rachel Zoll material on Warren)

(Brought to you by*)

Eartha Kitt. A stunning Hollywood friend with some 800 performances to her credit told me of an experience she had at an audition. After reading for the part the director told her, "Miss, I'm sorry, but we're looking for someone older, this character is supposed to be a woman in her mid-forties." "Look at me again," she replied, "this is what 45 looks like."

As we remember our last half-century's fascination with and admiration of Eartha Kitt, and mourn her Christmas-day death, it can inspire us all to watch her performance earlier this very year of "Ain't Misbehaving" and realize that "This is what 81 can look-- and sound -- like."

Talk about living one's life like the stage direction "Walk on; dance off"! This was one classy lady who just barely walked on this Earth as a young girl, but was perfectly capable of "dancing" off as Eartha at the end. May we all aspire to as much.

Slide the bar to 3:15 through the video, which is where her performance begins.

Pastor Rick Warren. President-elect Obama created a bit of a stir with his selection of Pastor Rick Warren to give the invocation at Obama's inauguration January 20th. Alexander Mooney, "Obama's Inaugural Choice Sparks Outrage," CNN, December 18, 2008 ("Prominent liberal groups and gay rights proponents criticized President-elect Barack Obama Wednesday for choosing evangelical pastor Rick Warren to deliver the invocation at the presidential inauguration next month."). This was primarily because of Warren's support last month of California's "Proposition 8" ban on gay marriage.

I've made my own support for gay marriage clear (e.g., Nicholas Johnson, "Gay and Lesbian Marriage" in "Gays, God and Plaques," November 24, 2008), and had I been a California voter would have voted against Proposition 8.

But while I've not always succeeded, I have tried to remember just how complex humans are, that we are as a general semanticist once observed "the only animal species able to talk ourselves into difficulties that would not otherwise exist," and that the odds of finding others who agree with you over the broad sweep of all the hundreds of things we could find to disagree about is far less than winning the lottery. (As readers of this blog have discovered, I even find myself disagreeing with myself from time to time.)

In the case of Mike Huckabee, we disagree about virtually everything up to and including evolution. And yet, among right wing conservatives I found him one of the least mean-spirited and divisive of the bunch. As he said on at least one occasion, "I'm a conservative, all right, I'm just not angry about it." See, Nicholas Johnson, "It's Huckabee," July 24, 2007.

I'm always on the lookout for a world leader who will speak to humanity's need to address the issues of war and peace, and poverty and materialism. For some of his years (1978 to 2005) that was, for me, Pope John Paul II -- notwithstanding my disagreement with his positions on women in the church, celibacy, abortion and contraception, among other things.

So I was willing to give Pastor Rick Warren some leeway. After all, I knew little about him, was not one of his flock of 100,000, had never been to his Orange County Saddleback Church, and had never really even heard him speak.

And then, yesterday evening, Christmas, I happened to turn to C-SPAN as it was rebroadcasting his talk to the Muslim Public Affairs Council's convention in Long Beach December 20, and I suddenly saw why he and the President-elect have the relationship they seem to have.

Here is a brief story about it from the Los Angeles Times, Raja Abdulrahim, "Pastor Rick Warren Addresses Muslim Group, Emphasizes Need to Find Common Ground," Los Angeles Times, December 21, 2008, and the C-SPAN location where it ought to be.

I challenge anyone to truly watch and listen to what this man was saying on that occasion and not come away with admiration for him and hope for our future. (Snippets of examples: "I love Muslims. I also happen to love Hindus and Jews and Buddhists. . . . We don't have to see eye to eye to walk hand in hand. . . . Al-Qaeda no more represents Islam than the Klu Klux Klan represents Christianity. . . . Religious congregations are the only set of organizations on earth that can successfully combat the five global illnesses of spiritual emptiness, corrupt leadership, disease pandemics, dire poverty, and illiteracy, and we must actively and directly cooperate with mosques to get the job done.")

As the AP's Rachel Zoll reports,
On paper, Warren might look like any other religious traditionalist. He is the son of a Southern Baptist pastor, graduate of a Southern Baptist seminary, and his megachurch in Orange County is part of the conservative denomination.

But Warren holds a different worldview than his roots suggest.

He has spoken out against the use of torture to combat terrorism. He has joined the fight against global warming and, encouraged by his wife, has put his prestige and money behind helping people with AIDS . . . at a time when a notable number of conservative Christians still consider the virus a punishment from God.

“If you want to save a life, I don’t care what your background is and I don’t care what your political party is . . . [T]hese humanitarian issues transcend politics, or ethnic or religious beliefs.”

While many religious conservatives openly condemn Islam as inherently evil, Warren reaches out to the American Muslim community.
Rachel Zoll, "Rick Warren's Biggest Critics: Other Evangelicals," Associated Press/Houston Chronicle, December 27, 2008

Pastor Rick Warren is to the religious community what President Barack Obama is to the political community -- someone to calm (even if not walk upon) the waters, to reach out to all, to focus on working together to solve the problems confronting humankind, to urge that we put aside the differences in our religious rhetoric to concentrate on the similarities in our perceptions of reality and need.

Moreover, both recognize the power of their personal example -- Obama with his diet, exercise, weight control, physical fitness, and value he places on intelligence and education (see, e.g., Eli Saslow, "As Duties Weigh Obama Down, His Faith in Fitness Only Increases," Washington Post, December 25, 2008, p. A1); Warren with his good works and a shunning of conspicuous consumption (tithing 90% and living on 10%) that could have come right out of my book, Test Pattern for Living, or that of my son Gregory's Put Your Life on a Diet.

I disagree with what seem now to be some of Obama's economic and policy positions, and a great deal more of Pastor Warren's theological positions.

But I deeply admire and applaud their ability to overlook their differences, and their ability to see why it is essential for our country that they -- and you and I -- demonstrate our ability to do so. As the AP's Rachel Zoll notes, "It is no surprise that he and Obama have become friendly. Each tries to operate outside a strict liberal-conservative divide, and has risked angering his supporters to do so." Rachel Zoll, "Rick Warren's Biggest Critics: Other Evangelicals," Associated Press/Houston Chronicle, December 26, 2008.

From Eartha Kitt's spirit to Pastor Rick Warren's new definitions of spirituality we have much to celebrate and be thankful for this holiday season for many of the world's religions and all of the world's peoples.


* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source -- even if I have to embed it myself.

# # #

Tuesday, December 23, 2008

Revolting Developments

December 23, 2008, 4:30 p.m.

Greed and Corruption Ultimately Plant the Seeds
of Revolution

(Brought to you by*)

The Federal Reserve Chairman Ben Bernanke gives what is apparently $7.7 trillion of taxpayers' money to his friends in the banking business and then refuses to reveal who they are, how much he gave to each, what he got for the taxpayers in return, what that was worth, and what was accomplished with the gift. For sources see, Nicholas Johnson, "Forget Madoff, Focus on Bernanke," December 17, 2008.

The fellow behind what is perhaps the largest fraud in history, a $50 billion loss for investors in his Ponzi scheme, turns out to be Bernard Madoff, a former chairman of the NASDAQ Stock Market. The $50 billion fraud was never noticed by reviewing officials at the SEC.

On December 23 we learned that Darrel W. Dochow, the Treasury's Office of Thrift Supervision western regional director, who "played a central role in the savings-and-loan scandal of the 1980s, overriding a recommendation by federal bank examiners in San Francisco to seize Lincoln Savings, the giant savings and loan owned by Charles Keating [and] one of the biggest institutions to collapse," was not merely allowed to keep his job.

This year, in a repeat performance, he "allowed IndyMac Bank to receive $18 million from its parent company on May 9 but to book the money as having arrived on March 31 [thereby allowing] the backdated capital infusion . . . to plug a hole that its auditors had belatedly found . . . [without which] its reserves would have slipped below the minimum level that regulators require for classifying banks as well capitalized . . . two months before IndyMac Bancorp collapsed in July, at a cost of $8.9 billion to taxpayers."Edmund L. Andrews, "Irregularity Uncovered at IndyMac,"New York Times, December 23, 2008; and see Binyamin Appelbaum and Ellen Nakashima, "Regulator Let IndyMac Bank Falsify Report; Agency Didn't Enforce Its Rules, Inquiry Finds," Washington Post, December 23, 2008, p. A1.

We read of Congress' submission to the threats from Wall Street and acquiescence in the first $700 billion bailout, with little more questioning, attention to detail, or insistence on conditions than it gave to President Bush's insistence on the urgency of undertaking an unprovoked war on Iraq.

We saw the pictures of the CEOs of Detroit's Big Three auto manufacturers getting out of their private planes before walking into a committee room with their tin cups, asking (initially) for $25 billion of our money. Numerous senators and members of Congress supported the gift -- notwithstanding the absence of anything remotely resembling a business plan explaining how these billions (ultimately $17 billion from the president) could possibly reverse the 40% decline in automobile sales.

Meanwhile, neither the President, the Democratically controlled Congress, or the Obama Transition Team has done one lick to stem the rising tide that's sinking all boats: the unemployment (and underemployment) that results from massive layoffs, and the mortgage foreclosures that are turning former homeowners into the growing ranks of the homeless.

And since the bankers obviously aren't using our money, the taxpayers' money, to help the American people, what are they doing with it? Read on.
Banks that have their hands out in Washington this year were handing out multimillion-dollar rewards to their executives last year.

The 116 banks that so far have received taxpayer dollars to boost them through the economic crisis gave their top tier of executives nearly $1.6 billion in salaries, bonuses and other benefits in 2007, an Associated Press analysis found.

That amount, spread among the 600 highest paid bank executives, would cover the bailout money given to 53 of the banks that have shared the $188 billion that Washington has doled out in rescue packages so far. . . .

Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management, . . ..

Such bonuses amount to a bribe for executives "to get them to do the jobs for which they are well paid in the first place," said Rep. Barney Frank, the Massachusetts Democrat who chairs the House Financial Services committee. . . .

The AP review . . . found that the average paid to each of the banks' top executives was $2.6 million in salary, bonuses and benefits.

Among other findings:

- Lloyd Blankfein, president and chief executive of Goldman Sachs, took home nearly $54 million in compensation last year. The company's top five executives received a total of $242 million. . . .

It received $10 billion in taxpayer money on Oct. 28 [2008]. . . .

- John A. Thain, chief executive of Merrill Lynch, topped all corporate bank bosses with $83 million in earnings last year. . . .

Like Goldman, Merrill tapped taxpayers for $10 billion on Oct. 28.

The AP review comes amid sharp questions about the banks' commitment to the goals of the Troubled Asset Relief Program, a law designed to buy bad mortgages and other troubled assets. . . .

The program . . . did not limit salaries and bonuses unless they had the effect of encouraging excessive risk to the institution. . . .

At Bank of New York Mellon Corp., chief executive Robert P. Kelly's stipend for financial planning services came to $66,748, on top of his $975,000 salary and $7.5 million bonus. His car and driver cost $178,879. Kelly also received $846,000 in relocation expenses, including help selling his home in Pittsburgh and purchasing one in Manhattan, the company said.

Goldman Sachs, paying as much as $233,000 for an executive's car and driver, told its shareholders that financial counseling and chauffeurs were needed so executives would have more time to focus on their jobs.

JPMorgan Chase chairman James Dimon ran up a $211,182 tab for private jet travel last year when his family lived in Chicago and he was commuting to New York. The company received $25 billion in bailout funds. . . .

[Rep. Brad Sherman, D-Calif.] wants them to come before Congress, like the automakers did, and spell out their spending plans for bailout funds.

"The tougher we are on the executives that come to Washington, the fewer will come for a bailout," he said.
Frank Bass and Rita Beamish, "AP study finds $1.6B went to bailed-out bank execs," Associated Press, December 22, 2008, 10:06 a.m. EST.

So what's my point with all this?

It is that there are limits to how much greed and corruption -- or width of the gap between the rich and the rest of us -- any nation's people will accept before they resort to measures other than free speech to vent their frustration.

This past April 2008, before the seriousness of the last four months' global economic collapse was widely comprehended, I began writing a series of blog essays that ultimately became Part IX of my new book, Are We There Yet? Reflections on Politics in America.

Here are some excerpts from one of the first entries on April 12.
Increasing income disparity, despair. . . I am not a conspiratorial theorist, nor am I charging that anyone truly desires to turn the United States into a third world country, in which the top 1% of super rich rule over a 90% in abject poverty. All I would observe is that what is happening -- as a result of what will be spelled out in this series -- is not that different from what would be happening if that were the goal of government officials and the ruling elite.

[F]rom the late 1980s to the mid-2000s . . . inequality increased across the country. . . . No state has seen a significant decline in inequality during this period. . . .

On average, incomes have declined by 2.5 percent among the bottom fifth of families since the late 1990s, while increasing by 9.1 percent among the top fifth.
Pulling Apart: A State-by-State Analysis of Income Trends, Center on Budget and Policy Priorities, April 9, 2008.

And see, for Iowa data, David DeWitte, "Report finds income gap growing in Iowa," GazetteOnline, April 9, 2008, 11:40 a.m. ("The income gap between rich and poor is growing faster in Iowa than in most other states, according to a new report, which found a 49.3 percent average income growth in the wealthiest Iowa households over the past two decades. . . .")

. . . and Revolution. I recall reading many years ago -- where it was I would have no way of recalling now -- that there is a rough mathematical formula for predicting the point at which a growing income disparity will ultimately produce a revolution.

No, I don't think we're yet there in the United States.

But I am one of those who thinks Senator Obama was right when he said, "Lately, there has been a little, typical sort of political flare-up because I said something that everybody knows is true, which is that there are a whole bunch of folks in small towns in Pennsylvania, in towns right here in Indiana, in my home town in Illinois who are bitter. . . . They are angry. . . ." Perry Bacon Jr. and Shailagh Murray,"'Bitter' Is a Hard Pill For Obama to Swallow; He Stands by Sentiment as Clinton Pounces," Washington Post, April 13, 2008, p. A6. . . .

It's reminiscent of Ben Stein's story about his visit with Warren Buffett.

Buffett, one of the nation's -- if not the world's -- wealthiest men, had just completed a study of the relative tax rates paid by his secretaries and clerks compared with his own.

It turned out that Mr. Buffett, with immense income from dividends and capital gains, paid far, far less as a fraction of his income than the secretaries or the clerks or anyone else in his office. . . . “How can this be fair?” he asked . . ..

Even though I agreed with him, I warned that whenever someone tried to raise the issue, he or she was accused of fomenting class warfare.

“There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”
Ben Stein, "In Class Warfare, Guess Which Class Is Winning," New York Times, November 26, 2006.

Those who refuse to acknowledge what's happening in America [do] little to assuage the anger of those on the losing side of this warfare.

And when that anger is permitted to seethe long enough the news from elsewhere can serve as a reminder of the limits that ultimately come to constrain the greed of oppressive governments and the super rich elite.

Barbara J. Fraser, "As Economy Grows, Income Disparity in Latin America Widens," Catholic News Service, August 3, 2007 ("a two-day general strike in the region was called to protest government economic policies. . . . The incident was one of many around Peru in mid-July, as teachers, farmers and others took their discontent to the streets . . .. Despite six years of steady economic growth, mainly from the export of minerals such as gold and copper, most Peruvians, especially those in rural areas, say they are not feeling the benefits.")

Thu-Trang Tran, "A new peasant revolution – is China learning from its past?" Inside Asia, June 1, 2006 ("Although the Chinese government may not wish to confront nor discuss the social unrest and violence of the Cultural Revolution, it seems the government is wary of history repeating itself. The government is concerned about the simmering social tension resulting from the widening wealth gap as the giant economy powers its way to the top spot.")

Associated Press, "Egypt: American freelance photojournalist and translator detained while covering riots," International Herald Tribune, April 10, 2008 ("Thousands of Egyptians angry over high food prices and low wages have been rioting this week in Mahallah, a Nile Delta city that is home to the Middle East's largest textile factory. Rising prices have struck hard in Egypt, a U.S. ally where 40 percent of the people live in or near poverty.")
. . .

We need to take the impact of our economy and governmental policies on ordinary Americans much more seriously than I sense our leaders and media are willing to do. Why? For starters, because I think it is the decent, just and humane thing to do.

But also for all the reasons I have laid out here . . ..
While I can't really say I'm surprised that America is where it is today after the last four months, I don't mean to leave the impression that when I wrote the series in April I had anticipated the economic collapse would occur when it did.

And I still believe as I wrote in April with regard to imminent revolution, "No, I don't think we're yet there in the United States."

But I've read a blog entry today in "The Hal Turner Show" that causes me concern, one that we may look back upon as among the first tiny tremors that should have alerted us to the earthquake to come, alerted us to the reality that what greed and corruption may be bringing us is something far worse than the mere statistics on unemployment and the homeless -- as awful and heart-wrenching as they may be.

Please understand that what follows, with some of the expletives deleted, was neither written nor endorsed by me. I am not personally urging the action suggested. Nor do I believe, today, that it represents a real threat to bankers or our country. I do think it is worth reproducing, comment, and concern.

December 21, 2008
$1.6 Billion of bank bailout money went to Executive bonuses, stock options and Country Club memberships! It's time to start kicking asses - LITERALLY

Washington, DC -- The government's General Account Office reports that $1.6 Billion of the taxpayer bailout money given to banks, has been spent on executive bonuses, stock options and country club memberships!

This grotesque and reprehensible mis-use of our hard-earned tax money has caused me to blow a gasket in anger. Who the hell do these rich banker f**ks think they are to use our tax money in such a way after they literally BEGGED us for help, claiming their banks would go broke without it?

The government reports that 600 banking executives got the money. If I had my way, I would ask 600 of my fellow taxpayers to walk up to each of those 600 bankers and punch the living s**t out of them wherever they could be found.

I wouldn't care if they were in their offices, walking on the street or at their homes in front of their wives and kids. These scumbags deserve a physical beating. They deserve to be hit in the face with a baseball bat.

I gotta tell ya, I'm REALLY pissed. So pissed that I will be researching the home addresses of these particular 600 people and will release those addresses publicly.

I wonder if I can incite enough anger against these bastards that folks just might go out and hurt them? It might be an interesting thing to try. I think it is worth a shot!

WARNING TO BANKING EXECUTIVES: If you do not return the bonuses, stock options and country club memberships bought with taxpayer bailout money, YOUR NAME AND ADDRESS will be made public in a manner designed to "incite" a reaction by the public. (Special emphasis on the word "incite!)

You have until Friday, December 26, 2008 to return the money. There will be no negotiating, no obeying of court orders of protection, no way to prevent being dealt with harshly.

I don't care about your employment contracts, I don't care about your civil rights and I sure as s**t don't care about the law or the courts.

You guys have f****d this country for the last time. It's time for you to be paid back and I intend to see that you receive your payback.
(color and emphasis in original; this entry in the "Hal Turner Show" came to my attention from a reference in Karl Denninger's The Market Ticker, "To Our Government: You Must Act Now," December 23, 2008.)

Let us hope that those in the Congress and Executive Branch, banks, Wall Street, corporate board rooms, and CEO offices will take these concerns to heart -- from whatever source they may come to them.

Whatever you and I may think of
Thomas Jefferson's belief that a little revolution from time to time is a useful thing, I'm not convinced this is such a time for America. Nor am I convinced it's about to happen. I do think, however, that those who believe it's an impossible scenario are irresponsible gamblers.

* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source -- even if I have to embed it myself.

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Monday, December 22, 2008

Et Tu, Toyota?

December 22, 2008, 6:30 a.m.

The Toyota Way

The Toyota Way is a book studied and applied by businesses around the world, as well as the name of the management and operational philosophy of the company that makes those top-rated Toyota automobiles. Jeffrey K. Liker, The Toyota Way: 14 Management Principles from the World's Greatest Manufacturer (McGraw-Hill, 2004).

So when Toyota President Katsuaki Watanabe announces the company's first loss in 71 years(!) ($1.7 billion) will be reported next March, and says “We’re facing an unprecedented emergency situation. Unfortunately, we can’t see the bottom,” it tells you more about the global economy than it does about Toyota.

After all, "The Toyota Way" is as sound as it ever was. The company opened its seventh auto-assembly plant in North America just this month. It's cutting executive pay, and laying off some "contract" workers, but so far as I know not yet any of the lifetime workers or executives. Unlike the American auto companies, Toyota made $28 billion last year and has $18.5 billion in cash on hand.

Nonetheless, Watanabe candidly acknowledges that “The change in the world economy is of a magnitude that comes once every hundred years.” Martin Fackler, "Toyota Expects First Loss in 70 Years," New York Times, December 22, 2008.

But with sales down 34% in both the U.S. and Europe, and both the dollar and Euro falling compared with the Yen, Toyota is now in the same shape it last was in March of 1938. See, Naoko Fujimura and Tetsuya Komatsu, "Toyota Forecasts Its First Operating Loss in 71 Years," Bloomberg, December 22, 2008.

Given Toyota's stellar record as a company, if 1938 is the closest analogy to the shape it's now in we're all in much worse shape.

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Sunday, December 21, 2008

There's Bad News and . . . and . . .

December 21, 2008, 5:20 a.m.

Dominique Strauss-Kahn is No Dr. Feelgood
(Brought to you by*)

Earlier this morning the BBC reported that International Monetary Fund chief Strauss-Kahn says the IMF has lowered its global growth forecast, and will likely lower it further in January. We should be concerned not only about "social unrest" but because "all the whole society is going to suffer," he says in the story excerpted below.

In a way there's nothing new in what he says. This has seemed to me a reasonable forecast since at least a year ago, and I've been writing about it here for months. But there's something about the assessment coming from a guy who's in contact with the financial ministers of the world's nations, and who has some responsibility for helping them out of the cataclysmic mess our "deregulate the markets" ideologues have made for the world's 6.7 billion people, that should get our attention.

While our governments -- from international, to national, to local -- are picking winners (investment bankers and auto executives) and losers (all the rest of us) I hope that someone is addressing the what-if economic scenarios. We have plans, nationally and locally, for dealing as best we can with chemical or biological terrorist attacks, tornadoes and floods, food or medical shortages, and so forth.

President-elect Obama is now being told by his economic advisers that unemployment may reach 9% next year, instead of 7% or 8%, and that his proposal for 2 million new jobs may need to be expanded if it's to benefit what may turn out to be an additional 3.5 million without jobs.

("President-elect Barack Obama has expanded his goals for a massive federal stimulus package to keep pace with the increasingly grim economic outlook, aiming to create or preserve at least 3 million jobs over the next two years.

The more aggressive target, up from 2.5 million jobs set a month ago, comes after a four-hour meeting last week in which Obama's top economic advisers told him the economy is now expected to lose as many as 3.5 million jobs over the next year. Obama was told that could drive unemployment, currently at 6.7 percent, above 9 percent, a figure not seen since the recession of the early 1980s." Lori Montgomery, "Obama Expands Stimulus Goals; As Economic Outlook Grows More Dire, Early Target for Job Growth Is Bolstered," Washington Post, December 21, 2008, p. A1.)

What we're now going through is the beginning of the beginning, not the beginning of the end. Nothing the government has done so far -- including the trillion-dollar-plus generosity of Paulson and Bernanke for their banker friends -- has done any good. Virtually all the estimates of downturn and future economic projections have turned out to be wrong -- on the optimistic side. It would appear to the casual observer that none of the geniuses currently in place know what the hell they're doing.

What if it ends up being twice, or four times, as bad as is now being projected? What if unemployment goes from 10% to 20%, or even 40%? What if it takes us not one or two years, but 10 or 20 years, to recover from the ravages of greed by the wealthy and profliget "credit card" spending by everyone from nations to consumers?

Are such scenarios likely? I don't think so. I'm certainly not advocating fear and gloom for their own sake.

It's not likely that an airplane is going to crash in my neighborhood either (although one once did) just because we live under a flight path, or that railroad freight cars are going to fall off the tracks near the neighborhood (although that once happened, too). But it's still worthwhile for local officials, and residents, to give a little thought to how we might respond if those things or others did happen. Indeed, we have mock exercises in Iowa City regarding possible local disasters that test the plans our emergency workers, local hospitals and communications systems have for dealing with them.

That's all I'm suggesting. That someone in Iowa City, and in Des Moines (for Iowa), and Washington (for the entire country) should be thinking through the worst case economic scenarios to see if there are things we should be doing, now, that would help, at least to some degree, should things turn even worse than the "experts" are today predicting. Pain is pain, whether medical or economic, and we're all going to suffer in one way or another. But there are clearly some ways of dealing with it that make more sense than others. It's not too early to start figuring out what they are.

From the BBC:
Dominique Strauss-Kahn said . . . the IMF has already cut its forecast for global growth next year, and he said the next projection, due in January, would be even worse.

Mr Strauss-Kahn spoke of "2009 as really being a bad year".

"I'm specially concerned by the fact that our forecast, already very dark... will be even darker if not enough fiscal stimulus is implemented," he said in an interview with BBC Radio 4.

He said it would take a spending stimulus equivalent to about 2% of global Gross Domestic Product, or about $1.2 trillion, to make a real difference. . . .

"The question of having social unrest has been highlighted by journalists and I can understand that, but it's only part of the problem," he said.

"The problem is that all the whole society is going to suffer."

In November, the IMF lowered its global economic growth forecast to 2.2% from 3%. . . .

"IMF urges spending to spur growth; More spending by governments will be needed to stimulate worldwide economic growth, the head of the International Monetary Fund (IMF) has told the BBC,"
BBC World Service, December 21, 2008.


* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source -- even if I have to embed it myself.

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Saturday, December 20, 2008

Of Theaters and Automobiles

December 20, 2008, 7:05 a.m.

From Nation's Economy to Iowa City's Theaters
Approach Should be Similar

(Brought to you by

What does Iowa City's Englert Theatre have in common with Detroit's General Motors? Read on.

President Bush left the White House long enough to kick the can down the road and then go back into hibernation. Notwithstanding what he represented to be his better instincts, he decided to hand over $17 billion of your money and mine to GM and Chrysler. In an ultimate example of the triumph of hope over experience, it's a "give me the money first, then I'll develop and show you my business plan" loan, made palatable to Republicans by virtue of its implicit goal of crushing one of America's formerly great unions, thereby carrying on the Reagan tradition begun with the air traffic controllers. Steven Mufson, David Cho and Cecilia Kang, "Aid in Hand, Clock Ticks for Detroit; With $17.4 Billion, a Mandate: Restructure by March or Go Bankrupt," Washington Post, December 20, 2008, p. A1.

I've written at length of the reasons why I think this approach is folly, and won't repeat again what's contained in the blog entries to which these links will take you:

Nicholas Johnson, "Trust Your Instincts, Auto Bailout's Terrible Idea," November 14, 2008

Nicholas Johnson, "Auto Bailout: An Open Letter to Congress," November 19, 2008

Nicholas Johnson, "Auto Loan Makes Too Few Dollars Even Less Sense," December 4, 2008

"What Was Wrong With the Auto Proposal?" in Nicholas Johnson,"Quick Fix for the Economy," December 12, 2008

Nicholas Johnson, "A Car in Every Garage," December 16, 2008
So, will things be better with Obama? If they know what's good for them, the jurors are going to stay out until at least May 2009 before coming to any judgment on that one.

Don't get me wrong, I'm as big an Obama enthusiast as anyone. That he is where he is today, that he was able to run a virtually error-free campaign, the good will he currently holds throughout the world, his clearly demonstrated ability to inspire us all, his seeming desire to turn down the rhetoric and work with all segments of America, are all indications that our hope has not yet been shown to have been misplaced.

But there are also troubling signs.

1. I share a little of the concern of former Bush advisor Peter Wehner, reported in a Washington Post appraisal of Obama's current cabinet and White House appointments: "Pragmatism has its place, but there are limits, as well. If you aren't anchored to a political philosophy, you get blown about, and government becomes ad hoc and you make it up as you go -- and if you're not careful, you begin to go in circles. . . . They're smart, they're well-educated, they're the upper crust, but the question is, do the parts make a whole, or is the whole less than the sum of the parts? . . . I'd buy somebody a dinner [if they] could define what Obamaism is as a political philosophy. If you don't have a political North Star, you can lose your way, and I'm not sure if these people have it."

2. "Deliberately structured dualism" was a phrase used to describe the split in jurisdiction over cable television regulation between the FCC and the cities. It might be used to describe what appears to be Obama's approach as well, but for the fact that he has more than two individuals, or newly created institutions, advising him on virtually any given subject. It will give him almost unlimited ability to go any direction with the four winds, which in some ways is an advantage. But it also multiplies by orders of magnitude the number of conflicts among personnel that will either create (a) more chaos in Washington than usual, or (b) a daily appointment schedule devoted to little more than smoothing ruffled feathers and dealing with threatened resignations. Alec MacGillis, "For Obama Cabinet, A Team of Moderates; In Picks, Few Hints About Policy Plans," Washington Post, December 20, 2008, p. A1.

So what does all this have to do with the Englert Theater?

The Englert, an Iowa City gem that owes its current existence and condition to a combination of taxpayer and wealthy donor support, shares with virtually every other institution in America today, like the auto industry, economic hard times.

It has proposed that the City provide it $50,000 a year for three years from community development funds (a source questioned by a number of those who have entered online comments to the Press Citizen's editorial on the subject).

Like the Big Three auto executives' position regarding "bailouts" and "investments," the paper believes, as its editorial headline proclaims, Editorial, "Englert request is an investment, not a bailout," Iowa City Press-Citizen, December 19, 2008 ("the theater's request isn't the theater staff calling for a new 'Save the Englert!' campaign. It's the staff asking the community to recognize the important work done by the Englert. Using economic development money for this purpose is as appropriate as was using $75,000 of economic development money as the city's portion of a loan program for local flood-affected businesses.").

I'd like to see Ford, Crysler and General Motors -- and the UAW -- prosper as they did in the 1950s and 1960s. I really would. And I'd certainly like to see the Englert prosper.

The questions are simply how best to do that in terms of both (a) efficiency and effectiveness, and (b) fairness to the rest of the national, or with regard to the Englert the local, economy.

The Englert is not the only theater in town, nor the only theater facing hard times. The arts are important to our community, not only in terms of the quality of life of its residents but also in terms of the overall economy -- our ability to attract and hold what Richard Florida calls the "creative class," the professionals and entrepreneurs who are a major source of any community's ability to build wealth.

But just as I've argued for an economy-wide approach to our current onrushing economic depression to end all depressions -- rather than merely providing trillions for bankers and billions for auto executives -- so too do I think we need a community-wide approach to the economic challenges confronting our local theaters.

In addition to the Englert, and the University-sponsored events formerly at Hancher and other venues, we have among others the City Circle Acting Company, Dreamwell Theatre, Iowa City Community Theatre, Rage Theatrics, Riverside Theatre, Young Footliters, and nearby theaters such as the Old Creamery Theatre in Amana, and in Cedar Rapids the Paramount Theatre, CSPS and Theatre Cedar Rapids.

Do I want the Englert to survive and thrive? Absolutely, I do. But not at the expense of the wealth of live theater we all benefit from in Iowa City and Eastern Iowa. Nor at the expense of the rest of Iowa City's arts. Nor at the expense of, beyond the arts, the entire local economy.

Fixing this one is a lot easier than dealing with the auto industry, folks. Let's take a broad view of the challenge and get on with it. There are tougher times ahead.

# # #

Thursday, December 18, 2008

Truly Priceless Holiday Gift

December 18, 2008, 9:20 a.m.

Kiva -- "Best Buy" in Gifts
(Brought to you by

Consumer Reports product ratings pick "best buys."

This time of year, even though times are tough, Americans are still looking for advice on which charitable contributions are a "best buy."

How about a "contribution" that is in fact a loan, with a history of virtually 100% repayment by the borrowers, that comes back to you and can be loaned out again over and over. Now if that's not a "best buy" what is?

Some relatively well-off families realize that they all have enough "stuff," and that rather than buy more things that aren't really wanted, won't be used -- or will soon break if they are -- they'd rather give gifts in each others' names to worthy charities. (Actually, some families that don't yet have enough stuff do the same.)

If that idea appeals to you, too, here's a suggestion I think you'll find appealing.

Because it's a "loan" rather than a "gift," and because the third-world entrepreneurs you'll be loaning to -- unlike the banking beneficiaries of Bernanke's $7.7 trillion largess with taxpayers' money (see yesterday's, Nicholas Johnson, "Forget Madoff, Focus on Bernanke," December 17, 2008) -- have a virtually 100% record of paying back all loans, you can "give" your money over and over again.

Kiva, the organization that administers this program, is growing in popularity. Loan applications that used to take days for Kiva supporters to fund now are on and off the Web site in hours -- sometimes minutes. At one point this past year they actually ran out of unfunded applications! This past week alone they've loaned out well over $1 million, to some 3500 new entrepreneurs, from some near-8000 new "members."

Look over the Kiva Web site and you'll see why.

I wrote about Kiva last year about this time, and thought it might be a nice blog entry to re-run every December. Here it is:

December 26, 2007, 10:15 a.m.

The Charitable Gift That Literally Keeps on Giving . . .
and Costs You Nothing

How can you give away your money and still have it? Sound too good to be true?

Well, it is true. Read on.

While we're enjoying (or suffering from) the excesses of the holiday season, a good many Americans' thoughts turn to what we should be doing for others.

Add it all up and divide by 300 million Americans and it turns out we're averaging nearly $1000 in charitable contributions from every woman, man and child. Last year we gave a total of $295 billion, 83% of which came from individuals. We averaged contributions of 2.2% of our disposable income (65% of all households earning under $100,000 a year were contributors). (Of that total nearly half went to religious organizations and educational institutions.) Add to these numbers the value of the donated time of that half of our population that does volunteer work of some kind each year, and we can feel fairly good about what we're doing for others. Jeffrey Thomas, "Charitable Donations by Americans Reach Record High; Individual giving accounts for 83 percent of $295 billion total in 2006,", June 26, 2007.

And yet, despite our best efforts, there are still over one billion people "living" (if it can be called that) on less than one dollar a day; every day 24,000 children die of hunger; 10 million under the age of five die every year of the diseases resulting from a lack of clean water. UN Secretary-General Kofi Annan, "A World Mired in Despair of Poverty 'Will Not be a World at Peace,'" October 17, 2003; Jan Eliasson and Susan Blumenthal, "Dying for A Drink of Clean Water," Washington Post, September 20, 2005, p. A23.

Nor are these the only fellow humans in need of economic assistance of some kind.

Clearly, our government should do more of our share to help the rest of the world. But the fact remains that, even with increased government aid and individuals' philanthropy, we can't do this job ourselves.

So what to do?

You've heard of Lao Tzu's Chinese proverb, "Give a man a fish and you feed him for a day. Teach him how to fish and you feed him for a lifetime." The only trouble with this solution is that the man, or woman, may not be able to afford a fishing pole -- or whatever else they may need to not only feed themselves, but start a modest fishing business.

Enter Kiva.

It has been said that information, or an idea, is an example of a kind of property that you can give to many others and still retain it yourself.

So it is with the money you give to Kiva. They use it, but you still have it. It's money that's not given, it's loaned (and to a recipient of your choice, not theirs) from a Kiva account in your name that you control. Because the repayment rates are so nearly 100% -- much better than what many of our commercial banks get -- you'll be able to loan that money over and over again.

Concerned about your $25 contribution going to a charitable organization paying its CEO over $250,000 a year -- sometimes millions. "What difference will my little contribution make?"

Well, with Kiva every penny of your loan goes to the recipient of your choice. There is no overhead! (Of course, you can also contribute to Kiva, to support its administrative costs, but it is certainly not required, and if you do it is a separate transaction.)

As the Kiva Web site explains:

Kiva lets you connect with and loan money to unique small businesses in the developing world. By choosing a business on, you can "sponsor a business" and help the world's working poor make great strides towards economic independence. Throughout the course of the loan (usually 6-12 months), you can receive email journal updates from the business you've sponsored. As loans are repaid, you get your loan money back.
In this political season, this is an approach that ought to appeal to all. Liberals should appreciate this opportunity to help others. Conservatives should support the idea of loans rather than gifts, and giving to businesses rather than making "welfare payments." Libertarians ought to like the idea of keeping the government ("our tax dollars") out of it.

Want to do something really effective about "the immigration problem" from the south? Loan the little money needed by potential entrepreneurs in Mexico, Central and South America. It will help enable them to continue to live better in their home country, employ others in the community, circulate their profits with purchases in their local economy, and better support their children. Want to help build families, and provide education for children? Favor women recipients.

The minimum contribution to a loan request is $25 -- and it looks like that's what a lot of contributors choose. But it's amazing how fast, once a loan request is posted on the Kiva site, that 40 individual Kiva contributors, together, can come up with a requested $1000 loan.

The Web site reports this morning [Dec. 26] that this week alone $750,000 has been contributed for loans, 17,000 new lenders have joined Kiva, over 1000 new businesses have been started, 323 entrepreneurs finished paying back their loans, and the average loan, once posted to the Web site, was fully funded within 7.5 hours.

The only "cost" of this operation to you is the "opportunity cost" of what you would have earned on that loan if, instead of loaning it through Kiva, or spending it at Starbucks, you invested it at 5% interest. How much is that? On a $25 loan literally "a dollar and a quarter" -- $1.25.

Of course, there are costs of this program -- it's just that they're paid for by the recipient of your loan, not you. Kiva partners with microfinance institutions in the recipients' home countries -- what Kiva calls its "field partners." The field partners are funded with the interest paid by recipients to the field partner on your loan. Yes, there is interest. But it is a small fraction of the prohibitive rates of interest charged by for-profit individuals or institutions in the recipient's country.

As a lender you can read all about your recipient of choice, the record of the field partner administering your loan, often see pictures of their project, and get regular updates on the progress of their business and repayments. Not only does it not cost you anything, it also makes you much closer to the ultimate recipient than a charitable contribution to a national, state or local organization.

Charitable giving is important -- essential to the continuation of many non-profits in our country. We need to continue to give generously.

But there is this additional option: become a "bank," a "microlender" to worthy potential (and existing) entrepreneurs in third world countries.

Now, while you're thinking about it, check out, and see what I've been talking about.

Make it a Happy New Year -- for you, and for the series of recipients who will benefit from that first Kiva loan of yours over the years to come.

# # #

Wednesday, December 17, 2008

Forget Madoff, Focus on Bernanke

December 17, 2008, 11:00 a.m.

Madoff and Bernanke:
Bad Apples or Poster Ponzis?

(Brought to you by

The Securities and Exchange Commission said Tuesday night that it had missed repeated opportunities to discover what may be the largest financial fraud in history, a Ponzi scheme whose losses could run as high as $50 billion. . . . Mr. [Bernard L.] Madoff was arrested at his Upper East Side apartment in Manhattan last Thursday by F.B.I. agents, after his two sons — both of whom work for the company — reported that he had confessed to them that his money-management business was “basically, a giant Ponzi scheme” and “a big lie.”
Alex Berenson and Diana B. Henriques, "S.E.C. Says It Missed Signals on Madoff Fraud Case," New York Times, December 17, 2008.

There are not a lot of people coming to Madoff's defense this week. There seems to be relatively widespread agreement that defrauding one's friends of $50 billion is not nice.

But how much difference is there between what Madoff did and what the investment and commercial banking industries have been doing to 305 million Americans over the last decade?

Not much, says Tom Friedman:
I have no sympathy for Madoff. But the fact is, his alleged Ponzi scheme was only slightly more outrageous than the “legal” scheme that Wall Street was running, fueled by cheap credit, low standards and high greed. What do you call giving a worker who makes only $14,000 a year a nothing-down and nothing-to-pay-for-two-years mortgage to buy a $750,000 home, and then bundling that mortgage with 100 others into bonds — which Moody’s or Standard & Poors rate AAA — and then selling them to banks and pension funds the world over? That is what our financial industry was doing. If that isn’t a pyramid scheme, what is?
Thomas L. Friedman, "The Great Unraveling," New York Times, December 17, 2008.

Two days later the comparison was being spelled out in even greater detail: Paul Krugman, "The Madoff Economy," New York Times, December 19, 2008.

So, meanwhile, what has Federal Reserve Chair Ben Bernanke been up to?

We all know about the $25, or $34, or $15, or $5 billion the auto industry says it needs. We're all appalled at the $700 billion Congress authorized for Wall Street with little more attention to detail than it gave to authorizing our "preemptive war" in Iraq.

But do you have any idea what the total is at this point?

It's not $700 billion, it's 11 times that: $7.7 trillion. That's right, $7.7 trillion.

Here's an excerpt from Bloomberg's report:
The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system . . ..

The unprecedented pledge of funds includes $3.18 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, . . . [dwarfing] the plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis. . . .

The worst financial crisis in two generations has erased $23 trillion, or 38 percent, of the value of the world’s companies and brought down three of the biggest Wall Street firms. . . .

The money that’s been pledged is equivalent to $24,000 for every man, woman and child in the country. It’s nine times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office figures. It could pay off more than half the country’s mortgages.
Read the whole story; there's lots more. Mark Pittman and Bob Ivry, "U.S. Pledges Top $7.7 Trillion to Ease Frozen Credit," Bloomberg, November 24, 2008.

But wait; it gets worse.

Having grabbed 10 times what we thought he'd taken from the taxpayers, Bernanke now refuses to tell Congress or the media or us who he gave our money to, or what he got for it on our behalf, or how much what he got is worth on the present market.

Don't believe it? Read on. Bloomberg's suing him.
The Federal Reserve refused a request by Bloomberg News to disclose the recipients of more than $2 trillion of emergency loans from U.S. taxpayers and the assets the central bank is accepting as collateral.

Bloomberg filed suit Nov. 7 under the U.S. Freedom of Information Act requesting details about the terms of 11 Fed lending programs, most created during the deepest financial crisis since the Great Depression. . . .

The Fed stepped into a rescue role that was the original purpose of the Treasury’s $700 billion Troubled Asset Relief Program. The central bank loans don’t have the oversight safeguards that Congress imposed upon the TARP. . . .

Congress is demanding more transparency from the Fed and Treasury on bailout, most recently during Dec. 10 hearings by the House Financial Services committee when Representative David Scott, a Georgia Democrat, said Americans had “been bamboozled.”

Bloomberg News, a unit of New York-based Bloomberg LP, on May 21 asked the Fed to provide data on collateral posted from April 4 to May 20. The central bank said on June 19 that it needed until July 3 to search documents and determine whether it would make them public. Bloomberg didn’t receive a formal response that would let it file an appeal within the legal time limit. . . .

Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would meet congressional demands for transparency in a $700 billion bailout of the banking system.

The Freedom of Information Act obliges federal agencies to make government documents available to the press and public. . . .

“There has to be something they can tell the public because we have a right to know what they are doing,” said Lucy Dalglish, executive director of the Arlington, Virginia-based Reporters Committee for Freedom of the Press.

“It would really be a shame if we have to find this out 10 years from now after some really nasty class-action suit and our financial system has completely collapsed,” she said. . . .

The Fed lent cash and government bonds to banks that handed over collateral including stocks and subprime and structured securities such as collateralized debt obligations, according to the Fed Web site.

Borrowers include the now-bankrupt Lehman Brothers Holdings Inc., Citigroup and New York-based JPMorgan Chase & Co., the country’s biggest bank by assets. . . .

“Americans don’t want to get blindsided anymore,” Mendez said in an interview. “They don’t want it sugarcoated or whitewashed. They want the complete truth. The truth is we can’t take all the pain right now.”

The Bloomberg lawsuit said the collateral lists “are central to understanding and assessing the government’s response to the most cataclysmic financial crisis in America since the Great Depression.” . . .

“I understand where they are coming from bureaucratically, but that means it’s all the more necessary for taxpayers to know what exactly is going on because of all the money that is being hurled at the banking system,” [Bruce Johnson, a lawyer at Davis Wright Tremaine LLP in Seattle] said.

The Bloomberg lawsuit is Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, U.S. District Court, Southern District of New York (Manhattan).
Mark Pittman, "Fed Refuses to Disclose Recipients of $2 Trillion," December 12, 2008.

$7.7 trillion. It kind of puts Madoff's little $50 billion fraud into perspective, doesn't it?

# # #

Tuesday, December 16, 2008

A Car in Every Garage

December 16, 2008, 7:30 a.m.

Harkin Didn't Write Again Today
(Brought to you by

Iowa's Senator Tom Harkin is drawing on the politics of fellow Iowan Herbert Hoover, who once promised "a chicken in every pot, a car in every garage" -- but you have to get your own chicken.

If all a CEO wants to do is keep her company from going bankrupt laying off workers makes economic sense -- especially if the top priority is hanging on to her multi-million-dollar salary and benefits package. And if she's a friend of yours, and you are a government official with the discretionary ability to dispense trillions of dollars, giving her a few billion also makes sense.

But if what you're trying to do is turn around the economy, it doesn't make a lot of sense to give money to the CEOs who are trying to sell stuff rather than the consumers who would like to buy stuff, have the power to drive 70% of our economy, and are out of work because of some CEO's decision.

As I wrote here recently: "Only when we put more money in the hands of consumers (or permit them to keep more of what they have) will there be any true rescue of the auto -- or any other American -- industry. This is one of those times when even if your only goal is to further enrich the wealthy, the only way to do it is to let the money trickle up, not down." Nicholas Johnson, "Quick Fix for the Economy," December 12, 2008.

It was nearly a month ago that I wrote "Auto Bailout: An Open Letter to Congress," November 19, 2008, addressed to the two Iowa senators and our local congressman. Since I don't presume this blog is the first thing they read every morning I also sent the letter to them the old fashioned way, through the postal service.

Dave Letterman had a running joke on his CBS "Late Night" show about his desire to appear on Oprah's TV show. He'd call his office, ask if Oprah had called that day, and then enter in his journal, "Oprah didn't call again today."

Well, "Senator Harkin didn't answer again today." It's a sad commentary about the disconnect between we the constituents and those who are supposed to be our "elected representatives." Read the "open letter," linked above. It seems to me the questions were pretty straight forward and involved matters of great consequence (the auto bailout) not only for Iowans, but for Americans generally.

(It's reminiscent of a conversation with a friend of mine a while back. She asked what I'd been doing and I replied that I was just staying at home, near the phone, thinking she might call. To which she replied, "How's that been working for you?" It was working kind of like the country-western line, "Since my phone still ain't ringing I assume it still ain't you," from Randy Travis' "Is It Still Over?" Well, checking my mailbox at the post office every day for replies from Washington hasn't been working for me any better than sitting by the phone.)

However, I at least want to give Harkin credit for an idea that is responsive to my endow-the-consumers-not-the-CEOs approach -- as well as a family member's suggestion that every American family be given a car. (We priced that one out and realized the cost was a few orders of magnitude beyond even the generosity of this Administration and Congress.)

Here's the story, as presented by Des Moines TV station KCCI:

Sen. Tom Harkin . . . introduced a bill earlier this week that in turn would take older, less-fuel-efficient cars off the road, while also giving buyers a big bonus.

The Sell Fuel Efficient Cars Act would provide a rebate of $10,000 to buyers who trade in a car more than 10 years old for a new American car. . . .

The rebate would be limited to families with an adjusted gross income below $40,000 a year or individuals making less than $25,000.

To get the rebate, you would be required to turn in a car more than 10 years old that is still drivable.

The rebate would only apply to purchases of fuel-efficient GM, Ford or Chrysler vehicles that are assembled in the United States. The car would have to have an average fuel economy of 25 miles per gallon.

Officials said close to 15 percent of automobiles that are manufactured by the Big Three automakers would qualify for the rebate.

There would be a one-car limit per family or individual and the program would end in 2009.
"Harkin Proposes $10K Auto Purchase Rebate," KCCI-TV8, December 12, 2008.


"A snowball's chance . . .." Snow balls have a great chance of survival in Iowa these days, indeed entire snowmen. The hell of Washington is, however, another matter. But this blog has always been more attracted to what's right, what's rational, than to what's expedient.

Win-win. Look at what all this proposal accomplishes. (1) It gets money to the Big Three auto companies, but by running it through the hands of consumers and the marketplace rather than handing it over to CEOs. (2) The money is not just free cash that can be used for anything (like the banks' bailout that was supposed to be used for loans, but instead was hoarded and used to buy up other banks); it is limited to the purchase of automobiles. (3) The retention of jobs (by suppliers and dealers as well as auto manufacturers) is dependent upon the sale (and therefore manufacture) of automobiles. No "solution" that does not involve the manufacture and sale of automobiles is a solution worthy of the name. (4) It puts money in the hands of those who need it most, individuals earning less than $25,000 or families earning less than $40,000 -- significantly more humane, and economically efficient, than further enriching those in the top 1/10th of 1% of wage earners. (5) It gets old and often unsafe cars off the road (those over 10 years old; although, disclosure: my vehicle turned 30 years old this year). (6) Because older cars tend to be less fuel efficient, and possibly more polluting, it helps reduce our dependence on foreign oil and harm from greenhouse gases. (7) It encourages Detroit to manufacture more fuel efficient vehicles.

Those are some of the positives. Now for some of the problems I see with this idea.

(1) This bill will probably never pass, so its primary value is just to get us thinking about how we ought to be going about our economic recovery -- no small contribution, but not an answer.

(2) Those who most need this kind of help may not be in an economic position to accept it. If we're talking about new cars that sell for something between $15,000 and $35,000, and folks who are earning between $25,000 and $40,000, and driving a 10-year-old car, those are the very people who are either out of work or about to be, people whose home may be in foreclosure, or whose credit cards are maxed out. They probably have neither the $5000 to $25,000 in cash, nor the ability to get that kind of credit, to enable them to buy a car -- even with the $10,000 rebate. Of course, if we're talking new cars selling for $12,000-$14,000 that's another matter.

(3) I was frankly surprised to read that only 15% of the cars made in Detroit can get 25 mpg -- and even that number is far more likely to be overstated than understated ("your mileage may vary"). Shouldn't the plan at least call for 35 mpg (my wife drives a 10-year-old Mazda four-door that gets 38 mpg highway)? Maybe electric; maybe hybred; maybe smaller vehicles. (India's new 50 mpg, $2500 Tata Nano might not be what Americans are looking for, but it does offer something to stimulate one's imagination as to what American manufacturers could design, build and sell.)

So thanks, Senator, for hopefully stimulating some more imaginative thinking in Washington and Detroit -- but I'd still kind of like an answer to my letter.

# # #

Monday, December 15, 2008

You Know It's Serious When We Start Laughing

December 15, 2008, 7:10 a.m.

This is Serious

Have you ever noticed how, when things start going sour, there comes a point when they're so bad they start making their way into jokes? I remember as a kid, during World War II, we had paperback books that were collections of military humor.

Well, it's happening now with the global economic depression.

I don't read the comic pages of the newspapers. I have an assistant who does that for me and alerts me when they begin to take on social significance -- as happened this morning [Dec. 15].

"Non Sequitur" under "C.E.O. Math," in a panel the width of the entire strip, has a corporate CEO sitting in his luxurious, spacious office, behind a desk, talking to an assembly line worker, saying "We crunched the numbers over and over on where we could cut back, and it kept coming down to whatever it is you guys do on the assembly line . . .."

"Close to Home" pictures three guys on one of those old hand-powered, open railroad flatbeds, going down the track with the caption, "Ridiculed for arriving in Washington in private jets, the Big Three auto CEOs found a more humble way to travel."

"Working it Out" pictures a teller talking to a customer at "Metro Bank" saying, "'Try not to think of it as a loan, Mr. Purnell. Think of it as your own personal bailout plan.'"

But perhaps one of the best statements about bailouts comes from one of my favorite comics, Wanda Sykes on Jay Leno's "Tonight Show" on NBC, September 23:

And then there's this parable that's been going around the Internet. (I'd be happy to credit the creator but I don't know who it is.) The post-parable commentary came with it, but I've modified it all a bit:

A Modern Parable

A Japanese company (Toyota) and an American company (GM) decided to have a canoe race on the Missouri River. Both teams practiced long and hard to reach their peak performance before the race.

On the big day, the Japanese won by a mile.

The Americans, very discouraged and depressed, decided to investigate the reason for the crushing defeat. A management team made up of senior management was formed to investigate and recommend appropriate action.

Their conclusion was the Japanese had 8 people rowing and 1 person steering, while the American team had 8 people steering and 1 person rowing.

Feeling a deeper study was in order, American management hired a consulting company and paid them a large amount of money for a second opinion.

They advised, of course, that too many people were steering the boat, while not enough people were rowing.

Not sure of how to utilize that information, but wanting to prevent another loss to the Japanese, the rowing team's management structure was totally reorganized to 4 steering supervisors, 3 area steering superintendents and 1 assistant superintendent steering manager.

They also implemented a new performance system that would give the 1 person rowing the boat greater incentive to work harder. It was called the "Rowing Team Quality First Program," with meetings, dinners and free pens for the rower. There was discussion of getting new paddles, canoes and other equipment, extra vacation days for practices and bonuses.

The next year the Japanese won by two miles.

Humiliated, the American management laid off the rower for poor performance, halted development of a new canoe, sold the paddles, and canceled all capital investments for new equipment. The money saved was distributed to the Senior Executives as bonuses and the next year's racing team was out-sourced to India.


The End.


Here's something else to think about: GM has spent the last thirty years moving suppliers and factories out of the US, claiming it can't make money paying American wages.

Toyota has spent the last thirty years building more than a dozen plants inside the U.S. The last quarter's results:

Toyota makes 4 billion in profits while GM is carrying $60 billion in debt and losing 4 billion each quarter.

The GM folks are still scratching their heads.

If this wasn't so true it might be funny.
To paraphrase Adlai Stevenson following his lost presidential election, "When you're too old to cry there's nothing left to do but laugh."

# # #

Friday, December 12, 2008

Quick Fix for the Economy

December 12, 2008, 5:30 a.m.

$14 Billion Bridge Loan to Nowhere Collapses
Why? Now What?
And Today's Quick Fix for . . . The Economy

Brought to you by

Why did the $14 billion loan to Chrysler and GM fail to pass?

Because rational analysis prevailed over political expediency.


What's next?

Now let's apply the same kind of tough love to a review of the financial industry's bailout -- a proposal that the House and Senate readily accepted with little or no insistence on onerous conditions, business plans or detailed proof of probable success. It was after all, as you'll recall, a proposal to drop 50 times as much taxpayer money ($700 billion vs. $14 billion) on Wall Street as on Detroit.

Who by name bears greatest responsibility for bringing on the current financial disaster? Who should go to prison for what they did?

There are various figures -- from $700 billion to $7.7 trillion -- regarding how much we're talking about from the Treasury and Fed for corporate welfare. Where is the detailed accounting and oversight? Precisely how much of the bailout went to whom, for what, with what effect? How much was spent for purposes other than what was intended? How much was "loans" and how much was cash? What is the likelihood of those loans being repaid? How much equity do taxpayers now have in the enriched institutions? To what extent have taxpayers simply been duped into paying for worthless, toxic trash? Which companies/CEOs that received taxpayer money have increased executives' pay (by whatever means), continued to travel in corporate jets, or spent some of it on luxury resorts?

Will the Republican (and Democratic Party) members of the House and Senate bring as much enthusiasm and commitment to these questions -- with at least 50 times the impact on the taxpayers -- as they brought to their efforts to kill off yet one more union?

What was wrong with the auto proposal?

The proposed auto industry loan involved "a proposal that was simply unacceptable to the vast majority of our side because we thought it frankly wouldn’t work,” according to Senator Mitch McConnell, R-Ky., Minority Leader. David M. Herszenhorn, "Senate Abandons Automaker Bailout Bid," New York Times, December 12, 2008.

I've been saying as much in blog entries here ever since the idea first reared its head, e.g., "Trust Your Instincts, Auto Bailout's Terrible Idea," November 14, 15, 16, 2008; "Auto Bailout: An Open Letter to Congress," November 19, 2008; "Auto Loan Makes Too Few Dollars Even Less Sense," December 4, 2008.

Are there a lot of businesses and jobs dependent on the auto industry? Absolutely. As Smothers Brothers head writer and musician ("Classical Gas") Mason Williams once observed, "Los Angeles is a city built by Detroit." That is to say, when GM bought up LA's light rail, destroyed it, and substituted auto dealerships and freeways, it was but one example of the reality that "America is a country built by Detroit."

It involves automobile and parts manufacturers, steel and glass manufacturers, dealerships, gasoline refineries, pipelines, filing stations, cement companies and highway contractors, earth moving equipment manufacturers, parking lots and garages, and an army of mechanics from "shade-tree" to the highly trained and uniformed in spotless facilities. It's stunt drivers in Hollywood and NASCAR drivers and their fans everywhere. It's every teenagers' dream of a driver's license and that first car. (Mason Williams also wrote an Autobiography that was the story of the automobiles in his life.)

(In case you were wondering why we don't enjoy the cost, environment and energy-saving benefits of the kinds of passenger and freight rail networks of other industrialized nations try adding up the collective political power reflected in the prior paragraph.)

Automobile sales are down approximately 40%. Does that have an impact on our economy in general and the auto-dependent portions itemized above? Absolutely.

But to argue that an additional 3 million will be thrown out of work if GM is forced to operate while in Chapter 11, rather than continue as it is, with $60 billion in debt, for another two or three months with $14 billion of taxpayer money is a wild and irresponsible stretch.

Americans are only going to buy so many new cars in 2009. They will buy them from dealers who will get them from automobile manufacturers where they will be made by UAW members and non-union workers, using parts from suppliers (here and abroad). The number of new car sales -- and thus the impact of the auto-related industries on America's economic decline -- is the metric by which to measure the severity and significance of the auto industries' retrenchment, not whether more of those cars now come from a well-managed Ford than a diminished GM. If there's a demand for new cars they will be manufactured; if there's not, they won't. And that's what will determine the welfare of those "3 million workers," not the future of GM.

And those sales figures, as I have argued here all along, will be a function of the money in potential customers' pockets, not the pay of auto company CEOs.

Today's "quick fix" for . . . the economy:
"It's the consumers, stupid!"

You want a quick fix for the auto industry -- and the rest of the economy?

o See to it that every able-bodied American is either (a) employed, and paid, doing the highest skilled task of which they are capable (i.e., recognize the economic burden (for the employee) and loss (for the economy) of "under-employment" and "part-time employment" as well as "unemployment"), or (b) provided some proportion of an equivalent amount of support until they are put in such a job.

o Institute universal, single-payer health care as rapidly as possible. It is an economic as well as moral tragedy that we are one of the few industrialized nations that does not provide this fundamental care to all of its citizens. The high costs (and for many unavailability) of health care and insurance are contributing to mortgage foreclosures and bankruptcies, an unhealthy population and workforce, and a diminished ability of American manufacturers to compete on the world market with companies that do not need to embed workers' health care costs into the prices of their products.

o Do whatever is necessary to keep home owners in their homes rather than assuming that money for investment and commercial banks, new home buyers, developers and home builders will somehow "trickle down" for all. There are many potential ways of doing this that I won't describe in detail (e.g., permit the equivalent of the Chapter 11 solutions offered to businesses; lengthen the mortgage terms, reduce the interest rates, adjust the home value to current market levels, and so forth).
Only when we put more money in the hands of consumers (or permit them to keep more of what they have) will there be any true rescue of the auto -- or any other American -- industry. This is one of those times when even if your only goal is to further enrich the wealthy, the only way to do it is to let the money trickle up, not down.

Once again it turns out that doing the right thing, the moral thing, the humane thing for all of our fellow Americans is also the most efficient and effective way of slowing, and then reversing, the downward economic spiral brought on by selfishness, stupidity, greed and corruption.

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Thursday, December 11, 2008

Today's Quick Fix: Controlling Tuition

December 11, 2008, 7:30, 8:15 a.m.

A Quick Fix for Education's
Rising Student Tuition -- And Accelerating Student Debt

Yesterday this blog offered "Three Quick Fixes," December 10, 2008, for the public policy challenges involving gay marriage, foreclosures, and the declining newspaper industry.

Today's entry solves the problem of rising college tuition and graduates' debt burdens -- in response to the 4.2% tuition increase just voted by the Iowa Board of Regents.

Yesterday's Des Moines Register forcefully put the case for holding the line on tuition increases. Editorial, "Regents: Vote no on tuition hike," Des Moines Register, December 10, 2008. But after their 90 minute discussion later that day the editorial had failed to persuade more than two members of the Board (Regents Gartner and Harkin) and tuition was ordered increased 4.2% by a vote of 6 to 2. Erin Jordan, "Regents OK 4.2% increase in tuition," Des Moines Register, December 11, 2008.

Extensive excerpts from both the editorial and today's story by Erin Jordan are at the end of this blog entry.

Clearly, everyone involved recognizes the dilemma.

Nationally, college budgets -- expenses supported by legislative appropriations, research grants, endowment income, students' tuition and fees -- have been increasing at rates well beyond general inflation. (Why that is so is beyond the scope of this blog entry.) Now that our economy is slipping on the ice at ever increasing speed toward the glacial crevice that is total global economic collapse, colleges are not immune from the squeeze all institutions are feeling and to which they are responding. Iowa's three Regents' institutions have been asked by the Governor to make $7 million worth of cuts between now and June 30.

At the same time, our nation's long term economic recovery and global competitiveness is dependent, as much as anything, on the quality of all our educational institutions -- and the quantity of our people who have successfully attended them. But students are already graduating with debt loads that would be problematical in the best of times, and these aren't the best of times. Families that can barely, if at all, pay for their children's education now aren't going to find it any easier once parents are laid off and the tuition costs are even higher.

So here's this morning's "quick fix" -- though admittedly one that requires the participation of many more folks than can be found in Iowa:

The Fix:

o Modify the high school senior year.

o Require two years of service from every high school graduate.

o Extend public education from K-12 to K-14, utilizing community colleges.

o Recognize the public and private benefit of college by splitting the cost.


o High school senior year. The National Commission on the High School Senior Year, among a great many other individuals and task forces, has observed that high school seniors are not getting all the benefit they might from their last year. Those qualifying for advanced placement ("AP") classes might better be taking equivalent courses in a community college or university. Those headed for the trades might better be spending some time job shadowing. Not only would this kind of innovation improve the lives of students, it's an example of increasing benefits to students while reducing costs (fewer teachers and buildings) and the school populations to more manageable size (many experts recommend 600 as the optimum high school enrollment).

o Post-high school service. Whether we should reinstate the military draft is beyond the scope of this blog entry. But the idea of some kind of two-year service has been around for some time, and is the practice in many countries. In addition to the military it could include the Peace Corps, VISTA, and numerous other opportunities for service. The benefits, in addition to the contributions made by the young people involved, would be the "real world" work experience they would gain, the added maturity from being two years older, the sense of having both "given back" and having now earned their addition education.

o K-14. It has been well over a half-century since the minimum amount of public education thought necessary for every citizen went from sixth or eighth grade to K-12. Many today believe a four-year college education should be considered the minimum. Isn't it time we expand public education to at least K-14 -- that is, two years beyond today's high school? It's called "public" not only because it is available to all at public expense but because the entire public benefits from having everyone educated to at least that level. Those two years, the equivalent of the freshman and sophomore years of college, can be much more efficiently provided by our community college system -- cheaper for the students, their parents, and the taxpayers. Given the number and accessibility of community colleges students can save on expenses, possibly by continuing to live at home, cheaper rent if they move, and less travel expenses if they commute. The two years could be provided free of tuition -- in repayment, in part, for the two years of service. And the community colleges are already set up to provide a dual track education: two years of college prep courses for those going on, and the range of two-year associate degrees for those who will be going directly into the trades or service sectors of the economy (along with some additional basic education and skills).

o Splitting college costs. By reducing the basic college education to two years (equivalent to today's junior and senior years) from the current four it would already cut students' tuition, and resulting debt load in half. (The economics of graduate and professional degrees, and universities' major research projects, are beyond the scope of this blog entry.) The possible political reluctance to "free college education" (either the current four-year programs, or the proposed junior and senior year program) is that much of the benefit of a given individual's education goes to that individual in the form of the additional lifetime income they earn. This proposal is that half of the cost of those two years would be paid by federal taxpayers (thus reducing the fraud and administrative hassle surrounding "in-state" and "out-of-state" designations). The other half would be paid out of a revolving fund created by all graduates. It would be created by their paying a small percentage of their adjusted gross income, collected as a part of the income tax process, into the revolving fund. Thus, those who benefited the most economically over the course of their lifetimes would pay the most; those who chose public service careers that paid them less would pay less into the revolving fund.

OK. That's the quick fix for today.

Now here are excerpts from the Register's editorial and Erin Jordan's story:

Editorial, "Regents: Vote No On Tuition Hike," Des Moines Register, December 10, 2008:

A growing number of layoffs and families losing their homes through foreclosure fill the news in Iowa, like the rest of the country. Add to that high student debt loads. And the expectation that the global economic crisis will only worsen in 2009, before it improves.

Yet the Iowa Board of Regents today is scheduled to vote when it meets in Cedar Falls on a proposed 4.2 percent tuition hike . . ..

The regents should vote no. . . .

What will families face if the regents vote yes?

Increases in room, board and other expenses, such as books, are only estimated at this point, but with the proposed tuition hike plus mandatory fees, the overall bill for in-state undergraduates at the U of I would jump 5.4 percent ($963) to $18,902 . . .

This editorial page has championed investing in these three jewels, which provide a good education for Iowa's young people at a relative bargain price, and economic development for the state. . . .

The country faces the worst financial downturn since the Great Depression. That justifies forgoing a tuition increase so students are not shut out of the universities just as they, the state and the nation need to prepare for the economic recovery that eventually lies ahead. . . .

[T]he governor and 2009 Legislature should look at how they can safeguard state appropriations for these great assets.

Erin Jordan, "Regents OK 4.2% increase in tuition," Des Moines Register, December 11, 2008:

The Iowa Board of Regents on Wednesday opted for a 4.2 percent increase that supports program needs at the state's public universities after considering freezing tuition levels . . ..

The board voted 6-2 in favor of the increase . . . after a 90-minute discussion . . ..

"Given the value we provide and the transformational opportunity that education affords, this is a reasonable increase in this economic environment," Regents President David Miles said. Other states are raising tuition at rates ranging from 10 percent to 25 percent, according to the board's executive director.

Regents Michael Gartner and Ruth Harkin, who voted against the increase, wanted to freeze tuition at this year's rates because of the poor economy. . . .

Iowa Gov. Chet Culver has asked the regents to trim $7 million from university budgets for this fiscal year, which ends June 30. . . .

Under 2009-10 tuition plans approved Wednesday:

- The University of Iowa would charge resident undergraduates $5,782. Nonresident undergraduates would pay $21,156, a 7.6 percent increase from this year. . . .

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Tuesday, December 09, 2008

Three Quick Fixes

December 9, 2008, 12:25 p.m.

Three Quick Fixes to Three Seemingly Intractable Problems
An Entry in
December 9, 2008

1. Question: What's the solution to the "'marriage' is between a man and a woman" vs. "gays' constitutional right to marriage" dilemma?

Answer: Civil unions for all.

Commentary: "Marriage" for heterosexuals and "civil unions" for homosexuals is not even "separate but equal." It's inherently unequal and unfair and a limitation on gays' civil rights. Moreover, it is state intrusion into something that ought to be left to the religious community: the "sanctity of marriage." One way to solve the problem is to grant gays the right to "marriage." That irritates some folks, many but not all of whom draw their objections from their religious beliefs (among other things). By having the state grant everyone only a "civil union" license (a) the inequality is removed, and (b) "marriage" is left to religious institutions, which would remain free to accept and exclude whomever they chose.

2. Question: What can be done to provide some relief for those about to be rendered homeless as a result of foreclosure without unjustly rewarding the improvident while in effect punishing those who've been paying their mortgages?

Answer: Four percent mortgages for all.

Commentary: The banks have demonstrated that they are reluctant to use the taxpayers' trillion-dollar generosity for the purposes for which it was intended. What's the Federal Reserve and inter-bank loan rate now, 0.5%, 1.0%? By lowering everyone's mortgage rate to 4% it would put money into the pockets of consumers -- the only meaningful (as well as humane) solution to our economic problems in an economy 70% of which is driven by consumer spending -- while still enabling the banks to make a reasonable return. Yes, those who couldn't even make a 4% mortgage loan payment would still lose their homes, so the truly improvident would not be bailed out, but for many this reduction would make the difference in their being able to continue paying the bank -- to the benefit of the bank as well as the homeowner. But it would give the same financial advantage to those who were wiser in their initial mortgage commitment.

3. Question: What's the answer for the failing newspaper industry in the age of the Internet?

Answer: An ASCAP-type arrangement for those who read the papers' content online.

Commentary: Newspapers are being hit from a number of directions at once. Like other public corporations, they are under pressure from Wall Street to not only make a profit, but an ever-increasing profit. The price of newsprint is up. The Tribune's $13 billion debt didn't help its prospects any. Advertising revenues are down, not only because of a failing economy generally, but because readership has been declining for some time. Part of the reason it's declining is because a number of folks are reading the content of the newspapers, for free, off of the Internet. Song writers get their compensation from a share of the license fees paid by broadcasters and others for the blanket licenses to play any of the thousands of songs licensed by ASCAP. The problem confronted by any single newspaper seeking to charge for its online content is that it will lose online readers to competitors who charge less, or nothing. By letting the newspapers enter into such an industry-wide agreement, all readers would have to pay something for the blanket license that would let us enter the Web sites of every American newspaper. The papers could then share those revenues in some proportion to the number of hits each paper's site gets -- not only increasing their income for every additional user (who, unlike hard copy subscribers, contributes virtually zero in incremental cost) but eliminating the costs associated with newsprint and delivery trucks.

That's three for today. Got any other problems you want solved?

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