. . . because much of the content relates both to Washington, D.C., and "outside the beltway" -- the heartland, specifically Iowa -- and because after going from Iowa to Washington via Texas and California I subsequently returned, From DC 2 Iowa.
February 1, 2009, 2:00 p.m.; February 2, 2009, 12:20 p.m. (addition of quotes/links to analyses by Ralph Nader and Paul Krugman, and reports of banks seeking liquidity from illegal drug cash, and hiring from abroad while laying off 100,000 American citizens the last three months)
Disgusted, discouraged, depressed -- and very, very angry.
Those are the reactions of millions of Americans to what Washington institutions -- the Bush and Obama Administrations, the Treasury, Federal Reserve, House and Senate -- have done (and are now apparently preparing to do -- again!) with what will be trillions of taxpayers' dollars wastefully lavished on the greedy, ignorant, sociopaths supposedly leading our Wall Street, investment, and banking corporations.
I share these reactions of my fellow Americans, for reasons developed further down this blog entry.
The good news.
But I want to begin with some of President Obama's positive accomplishments (from my perspective) during, not his "first 100 days," but "first 10 days." I remain impressed with his intelligence and potential for positive accomplishment -- notwithstanding his approach to the financial community and his disastrous Afghanistan policy (what Newsweek's February 1 cover story describes as "Obama's Vietnam") -- and want to keep such concerns as I have in a balanced perspective.
Following an unprecedented public turnout for his inauguration, in his first ten days President Obama (among other things) loosened restrictions on public access to presidential records and public records requests under FOIA generally, strengthened ethical standards for executive branch personnel, put a pay freeze on White House staff pay, indicated he wanted Guantanamo closed within a year, banned torture (which his new Attorney General later explained includes waterboarding), reversed Bush's ban on stem cell research and the "Mexico City Policy" (thereby making possible assistance to NGOs offering voluntary family planning), tightened the CAFE automobile fuel efficiency (mpg) standards, permitted California (and other states) to raise emission standards above those in the federal Clean Air Act, signed the Lilly Ledbetter Fair Pay Act, and supported the Senate's expansion of the State Children's Health Insurance Program, or SCHIP.
His Interior Secretary is already going after the Bush scandal involving Department of the Interior civil servants literally in bed with oil company employees. And his Treasury Secretary is cracking down on corporations using taxpayer money to lobby Congress for more bailouts. And during this time Obama reached out -- to the Arab world with his interview on Al Arabiya TV ("Americans are not your enemy"); Republicans, with his trip to the Hill, cocktail party at the White House, and invitations to join him for a Super Bowl party; and top corporate CEOs with a meeting in the White House. (See generally, White House.gov, and especially its "The White House Blog.")
That's quite a ten-day record of accomplishment. And so far as I know he didn't even rest on the eleventh day, let alone the seventh. Whether it portends a pace that will be sustained over the next few months, or is only a starting gun sprint to placate what Senator Paul Wellstone used to call "the Democratic Wing of the Democratic Party," only time will tell.
Meanwhile, . . .
"There's a Bailout Coming, But It's Not for You"
Neil Young's pretty well got this Wall Street buddies bailout nailed in his new "Fork in the Road" song, "There's a Bailout Coming, But It's Not for You":
What follows are some examples of investment community and other corporate CEOs' behavior. They range between the merely outrageous to the seriously criminal. But the point of listing them is not the individual examples of private planes and excessive bonuses.
The point is what these examples reveal about these CEOs' stupidity, arrogance, insensitivity, ignorance, greed, sense of entitlement, sociopathic tendencies, inability to run their businesses ethically, legally and profitably -- in short, why they simply cannot be relied upon, or trusted, to use trillions of taxpayer dollars to get us out of the mess they created. "Conditions" on future bailouts requiring them to repay some unearned "bonuses" or sell some private jets won't change those underlying problems.
On January 31 President Obama's message to the nation included, "Soon my Treasury Secretary, Tim Geithner, will announce a new strategy for reviving our financial system that gets credit flowing to businesses and families. We'll help lower mortgage costs and extend loans to small businesses so they can create jobs. We'll ensure that CEOs are not draining funds that should be advancing our recovery. And we will insist on unprecedented transparency, rigorous oversight, and clear accountability -- so taxpayers know how their money is being spent and whether it is achieving results." President Barack Obama, "Moving Forward," Address of the President to the Nation, January 31, 2009.
No, no, no, Mr. President. Not on my dime. "A new strategy"? "Ensure that CEOs are not draining funds"? "Rigorous oversight, and clear accountability"? I don't think so.
It may have been Bush's Secretary of the Treasury, Paulson, who offered the three-page $700 billion plan for bailing out his Wall Street friends, but it was the Democrats in Congress who voted for it, and President-elect Obama who endorsed it. And now the speculation is that New Hampshire Republican Senator Judd Gregg -- who "was the GOP's chief negotiator for the $700 billion bailout of the financial industry" -- is high on the list of those under consideration for Secretary of Commerce. Philip Elliott, "Sen Judd Gregg Considered for Commerce Secretary," Associated Press/Yahoo! News, January 30, 2009.
One of the President's problems is that he has surrounded himself -- exclusively so far as I can tell -- with former Wall Street executives and economists who think the solution to the economic woes of laid-off workers and homeless former homeowners is giving trillions of taxpayers' dollars to the guys who created the problem. There are other economists out there, but it's not clear they are being heard. For the details see, Steve Clemons, "No Economic Team of Rivals On Obama Staff: Rubin's Manic Neoliberals Dominate," January 28, 2009 (Clemons is Director of the American Strategy Program at the New America Foundation).
Another problem involves our president's ties to the Wall Street community. I am not for a minute suggesting that campaign contributions would play a role in his decisions. But I do think that they contribute a public relations problem of appearances. Among his largest contributors were those associated with:
Goldman Sachs . . . . . . . . $955,223 JPMorgan Chase & Co . . $642,958 Citigroup Inc . . . . . . . . . . . $633,418 UBS AG . . . . . . . . . . . . . . $505,017 Morgan Stanley . . . . . . . . $483,523 "Barack Obama's Top Contributors," OpenSecrets.org. And those figures don't even include (I assume) their contributions to the Democratic National Convention and the Inauguration (which can sometimes run into millions) -- "soft money" contributions unlimited by "campaign contributions" caps.
So now, lest we forget, let's review the behavior of these corporate CEOs and others who believe that "trickle down" will work better (for them) than a "trickle up" effort to relieve more human misery, and put more money in the hands of the laid-off workers, and homeless former homeowners, most likely to spend it immediately.
"For some people at AIG, the insurance giant rescued last month with an $85 billion federal bailout, the good times keep rolling. Joseph Cassano, the financial products manager whose complex investments led to American International Group's near collapse, is receiving $1 million a month in consulting fees. Former chief executive Martin J. Sullivan, whose three-year tenure coincided with much of the company's ill-fated risk-taking, is receiving a $5 million performance bonus. And just last week, about 70 of the company's top performers were rewarded with a week-long stay at the luxury St. Regis Resort in Monarch Beach, Calif., where they ran up a tab of $440,000." Peter Whoriskey, "AIG Spa Trip Fuels Fury on Hill; Pressing Executives to Concede Mistakes, Lawmakers Blast Them About Bonuses,"Washington Post, October 8, 2008, p. D1.
"There are 24 daily nonstop flights from Detroit to the Washington area. . . . [T]he chief executives of the Big Three automakers opted to fly their company jets to the capital for their hearings this week before the Senate and House -- an ill-timed display of corporate excess for a trio of executives begging for an additional $25 billion from the public trough this week. 'There's a delicious irony in seeing private luxury jets flying into Washington, D.C., and people coming off of them with tin cups in their hands,' Rep. Gary L. Ackerman (D-N.Y.) advised the pampered executives . . .." Dana Milbank, "Auto Execs Fly Corporate Jets to D.C., Tin Cups in Hand,"Washington Post, November 20, 2008, p. A3.
"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." Mark Pittman, "Fed Refuses to Disclose Recipients of $2 Trillion," Bloomberg.com, December 12, 2009.
"The United Nations' crime and drug watchdog has indications that money made in illicit drug trade has been used to keep banks afloat . . . UNODC Executive Director Antonio Maria Costa said . . . drug money often became the only available capital when the crisis spiralled out of control last year. . . . '[D]rug money is currently the only liquid investment capital, . . . In the second half of 2008, liquidity was the banking system's main problem and hence liquid capital became an important factor.'" "UN crime chief says drug money flowed into banks," Reuters, January 25, 2009.
"Beleaguered Citigroup is upgrading its mile-high club with a brand-new $50 million corporate jet -- only this time, it's the taxpayers who are getting screwed -- even though the bank's stock is as cheap as a gallon of gas and it's burning through a $45 billion taxpayer-funded rescue . . .." Jennifer Gould Keil and Chuck Bennett, "Just Plane Despicable; 'Rescued' Citi Buying $50M Jet,"New York Post, January 26, 2009.
"[That] John A. Thain, the fallen boss of Merrill Lynch, spent $1.2 million redecorating his office as Merrill hurtled toward its end seemed only to confirm people’s worst suspicions about money and the hubris it can breed. His $35,000 'commode' might strike some as a bit over the top." Andrew Ross Sorkin, "The Titans Take It on the Chin,"New York Times, January 26, 2009.
"Merrill Lynch lost $27 billion last year, and yet still managed to rush through $4 billion worth of year-end bonuses in the days before it was taken over by Bank of America. . . . Merrill Lynch is not the only irresponsible institution out there. Despite a year of record losses, despite all the taxpayer money being injected into our financial institutions, bonuses for 2008 were, in some cases, down less than 50 percent from those the previous year. . . . [S]ome institutions that begged for taxpayer aid to stave off bankruptcy — simply to stay alive — made 2008 compensation packages their first order of business after receiving their bailouts. . . . [I]t’s one thing to reap great rewards when creditors are being repaid and shareholders are earning a return; it’s quite another to reward failure almost as well." Dave Krasne, "Money for Nothing,"New York Times, January 26, 2009.
"Andrew Cuomo, New York’s attorney general, said Tuesday that he has subpoenaed John A. Thain, the former Merrill Lynch chief executive, over bonuses paid out by the firm just before it was taken over by Bank of America. . . . 'The fact that Merrill Lynch appears to have moved up the timetable to pay bonuses before its merger with Bank of America is troubling to say the least and warrants further investigation,' Mr. Cuomo said in a statement." Andrew Ross Sorkin, ed., "Cuomo Subpoenas Thain Over Merrill Bonuses,"New York Times/Deal Book, January 27, 2009.
"The New York Times reported that some big banks receiving government bailout money were still lobbying the government — giving the appearance, at least, of using taxpayer money to lobby for more taxpayer money . . .." Brian Knowlton, "Geithner Cracks Down on Bailout Lobbying,"New York Times/The Caucus, January 27, 2009.
Because the recently revealed $18 billion in executive bonuses has been one of the most outrageous of the excesses, and has received some of the greatest attention, here is a little more on that one than the others:
"[E]mployees at financial companies in New York, the now-diminished world capital of capital, collected an estimated $18.4 billion in bonuses for the year. . . .
Some bankers took home millions last year even as their employers lost billions.
The comptroller’s estimate . . . excludes stock option awards that could push the figures even higher. . . .
'[T]here needs to be an accounting about whether there was any taxpayer money used to pay bonuses or to pay for corporate jets or dividends or anything else,' [The state comptroller, Thomas P.] DiNapoli said in an interview. . . .
At many banks, those payouts were based on profits that turned out to be ephemeral. . . .
According to Mr. DiNapoli, the brokerage units of New York financial companies lost more than $35 billion in 2008, triple their losses in 2007. . . .
Wall Street is betting that the Obama administration will move swiftly to buy some of banks’ troubled assets . . ..
Financial industry executives argue that they need to pay their best workers well in order to keep them, but with many banks cutting jobs, job options are dwindling, even for stars.
Lucian A. Bebchuk, a professor at Harvard Law School and expert on executive compensation, [said bonuses] are meant to reward good performance and retain employees. But Wall Street disbursed billions despite staggering losses and a shrinking job market.
'This was neither the sixth-best year in terms of aggregate profits, nor was it the sixth-most-difficult year in terms of retaining employees,' Professor Bebchuk said.
Echoing Mr. DiNapoli, Professor Bebchuk said he was concerned that banks might be using taxpayer money to subsidize bonuses or dividends to stockholders. 'What the government has been trying to do is shore up capital, and any diversion of capital out of banks, whether in the form of dividends or large payments to employees, really undermines what we are trying to do,' he said."
"During the last three months of 2008, the largest banks that received taxpayer loans announced more than 100,000 layoffs. . . . [Meanwhile, the] dozen banks now receiving the biggest rescue packages, totaling more than $150 billion, requested visas for more than 21,800 foreign workers . . . for positions that included senior vice presidents, corporate lawyers, junior investment analysts and human resources specialists. The average annual salary for those jobs was $90,721, nearly twice the median income for all American households. . . . [B]anks that accepted federal bailout money also enlisted uncounted foreign workers, often in technology jobs, through intermediary companies known as 'body shops.' . . . Sen. Chuck Grassley of Iowa, . . . [observed] 'In this time of very, very high unemployment . . . these banks . . . [are] playing the American taxpayer for a sucker.'" Frank Bass and Rita Beamish, "AP Investigation: Banks sought foreign workers; Bailed-out banks sought to hire 21,800 foreign workers in past 6 years," Associated Press/Yahoo! Finance, February 1, 2009.
"Bankers have done the equivalent of stuffing the mattress in the last few months, despite being prodded by the government to lend the hundreds of billions in cash being pumped into the banking system by the Federal Reserve and other regulators. They've been hoarding cash at the Federal Reserve . . .. Banks have to stash away a minimal level of reserves, but they can keep extra reserves. Last year at this time, excess reserves totaled $1.7 billion, according to Fed data. . . . Excess reserves went from $2 billion in August to $267 billion in October. As of the middle of January, they had mushroomed to $843 billion . . . currently accruing interest at 0.25%, the Fed's benchmark short-term rate." Liz Moyer, "Banks Promise Loans But Hoard Cash,"Forbes, February 3, 2009.
"Until it came to light Tuesday [February 3], Wells Fargo, which received $25 billion in federal funds, was blithely planning a series of 'employee recognition outings' to Las Vegas luxury hotels this month.
As ABC reported, Bank of America took its $45 billion in bailout funds and sponsored a five-day carnival outside the Super Bowl stadium, and Morgan Stanley took its $10 billion in bailout money and held a three-day conference at the Breakers in Palm Beach. (Morgan Stanley had also still planned to send top employees to Monte Carlo and the Bahamas, events just canceled.)
The New York Post revealed that Sandy Weill, former chief executive of Citigroup, took a company jet to fly his family for a Christmas holiday to a $12,000-a-night luxury resort in San José del Cabo, Mexico. No matter that the company just got a $50 billion federal bailout and laid off 53,000 worldwide.
As Maureen Dowd earlier observed, "At least the old robber barons made great products. When you make money out of money, unmoored from morality and regulators, it must unhinge you. How else to explain corporate welfare queens partridge hunting in England, buying French jets and shopping for Lamborghinis?" Maureen Dowd, "Disgorge, Wall Street Fat Cats,"New York Times, January 31, 2009.
Ralph Nader has provided one of the most informative descriptions of how we got here, and what we can do to fix it, in Ralph Nader, "Wither Wall Street," Nader.org, January 30, 2009, in the course of which he asks, "First, do Wall Street Institutions do anything so vital for the national interest that they justify trillions of dollars to save them from the consequences of their own excess? Second, is it possible that the whole Wall Street edifice is built on an illusion of phantom wealth that carries deadly economic, social, and environmental consequences for the larger society? Third, are there other ways to provide needed financial services with greater results and at lesser cost?"
"Given these attitudes and behavior, this fraud and sense of entitlement, it would be unconscionable to simply hand over more taxpayer money to this crowd -- not just because they have now demonstrated that 'they don't deserve it' (though they don't), not just because they should be punished with prison sentences rather than rewarded financially (though they should), but because we're now into a 'fool me once, shame on you; fool me twice, shame on me' scenario in which it should be abundantly clear to all that this approach hasn't, and won't, work.
"Does this mean that more banks will fail? Yes. Just like more auto dealerships and retail stores will fail. But any company that's 'too big to fail' is simply too big. Capitalism, 'the market,' contemplates failure as well as success. It will take time to calculate, but require the banks to put a marketplace value on those 'toxic assets.' They're worth something. And at that point offer those assets -- or the entire bank itself -- for sale in the marketplace. It will fetch something. And once it's fairly valued there will be buyers, there will be investors, there will be capital, there will be loans -- and it will all have been done with market forces and without additional taxpayer dollars."
Dowd also shares with us Senator Carl Levin's reaction:
"Senator Levin said that the financiers will not be able to change their warped mentality, but will have to be reined in by Geithner’s new leashes. 'I have no confidence that they intend or desire to change,' Levin told me. 'These bankers got away with murder, and it’s obscene that close to nothing is being asked of financial institutions. I get incensed at the thought that a bank that’s getting billions of dollars in taxpayer money is out there buying fancy new airplanes.'" Maureen Dowd, "Wall Street’s Socialist Jet-Setters,"New York Times, January 28, 2009.
I agree with almost everything Senator Levin told Dowd. Why "almost"? Because -- for the reasons outlined above -- I don't believe that being "incensed" (without prosecutions) is enough, or that Treasury Secretary Geithner has the ability (on the assumption he even has the desire) to come up with any "new leashes" that could keep "the financiers . . . reined in."
If, perchance, you are among those who don't find Maureen Dowd, Ralph Nader and Nicholas Johnson persuasive sources of economic analysis, here are excerpts from what Nobel Prize-winning economist Paul Krugman has to say:
[T]he administration’s plans for a banking system rescue . . . are shaping up as a classic exercise in “lemon socialism”: taxpayers bear the cost if things go wrong, but stockholders and executives get the benefits if things go right. . . .
[A] Washington Post report based on administration sources says that [Treasury Secretary Tim] Geithner and Lawrence Summers, President Obama’s top economic adviser, “think governments make poor bank managers” — as opposed, presumably, to the private-sector geniuses who managed to lose more than a trillion dollars in the space of a few years.
And this prejudice in favor of private control, even when the government is putting up all the money, seems to be warping the administration’s response to the financial crisis. . . .
[B]ank stocks are worth so little these days — Citigroup and Bank of America have a combined market value of only $52 billion — that the ownership [by taxpayers, in exchange for the bailout funds] wouldn’t be partial: pumping in enough taxpayer money to make the banks sound would, in effect, turn them into publicly owned enterprises.
My response to this prospect is: so? If taxpayers are footing the bill for rescuing the banks, why shouldn’t they get ownership . . .. But the Obama administration appears to be tying itself in knots to avoid this outcome. . . .
[I]n return for what is likely to be a huge subsidy to stockholders, taxpayers will get, well, nothing.
Will there at least be limits . . . to prevent more of the rip-offs that have enraged the public? President Obama denounced Wall Street bonuses in his latest weekly address — but according to The Washington Post, “the administration is likely to refrain from imposing tougher restrictions . . .." Mr. Obama’s tough talk is just for show. . . .
There’s more at stake here than fairness . . .. [R]escuing the financial system, even if it’s done right, is going to cost hundreds of billions more. We can’t afford . . . huge windfalls to banks and their executives, merely to preserve the illusion of private ownership.
We are dealing here with the Wall Street equivalents of Dr. Evil, men and women who have distorted the free private enterprise system into "if we make a profit it's all mine; if we have losses they're all yours" -- socialism for the rich and free private enterprise for the poor. As with Dr. Evil, give them millions and they'll ask for billions; give them billions and they want trillions. There's no leash made, for man or beast, that can rein them in. The only solution is to give them nothing -- notwithstanding their Dr. Evil-style threats of imminent doom.
President Obama may call their behavior "shameful," and say he wants Secretary Geithner to send them that message, but you'll note he then goes on to confront "the possibility of having to ask Congress for additional large sums of money, beyond the $700 billion already authorized, to prop up the financial system . . .." Sheryl Gay Stolberg and Stephen Labaton, "Obama Calls Wall Street Bonuses 'Shameful,'"New York Times, January 29, 2009.
What part of "no more!" and "enough already!" don't you understand, Mr. President? We're your fans. We worked to put you in the White House. We respect and admire you. We want you to succeed. Giving more billions to Wall Street is not the way to turn around this economy (as has already been proven), nor to ensure your political and historical success. Just say, No; just don't do it.
The Stimulus Package
Although beyond the scope of this blog entry, I must concede I have some concerns about the stimulus package as well.
While I can understand the practical politics of devoting as much as one-third of the package to tax cuts in an effort to work in a bipartisan fashion with the Republicans, I can't understand continuing to do so when the House Republicans voted as a bloc in opposition to the effort.
Not only do tax cuts further increase our deficit and debt, and provide a small fraction of the economic stimulus of spending programs, the bottom line is that there will be something like $300 billion less in the package, $300 billion that would have been able to produce real economic growth.
On the other hand, I think the Republicans are right that the rest of the package is not as narrowly focused as they and I would wish that it was on maximizing the number of jobs per dollar and other immediate boosts to the economy.
(For a variety of understandable graphs regarding where we are now economically, see "January Economic Summary in Graphs," Calculated Risk, January 31, 2009.)
There are few, if any, of the proposals in the package with which I would disagree as a matter of public policy regarding appropriate government expenditures. But that's not the issue.
The issue is what can we do now, to boost the economy now, and what proportion of President Obama's stimulus package is narrowly focused on that goal -- in contrast to the amount that has been diverted to tax cuts and worthy, but long term, programs?
For now, however, I'm most concerned -- indeed, angry -- about the prospect of throwing even more money into a trickle down from Wall Street program to be run by executives who have already demonstrated they are better at destroying businesses for their own selfish gain than at building them, who haven't known what to do with the money -- and seemingly care less.
"Not one more damn dime," Mr. President. Please.
__________
Related Blog Entries on Global Economy and Bailouts
* 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. -- Nicholas Johnson
As the American people, their elected representatives, and the mainstream media focus on the deteriorating economy and the President's "America's Recovery and Reinvestment Plan" (President-Elect Barack Obama, "American Recovery and Reinvestment," January 8, 2009, Whitehouse.gov/The Agenda/Economy/The President's American Recovery and Reinvestment Plan) most of the commentary comes in the form of numbers rather than names -- the stock markets' percentage changes, the number of bank failures, the unemployment percentages, the number of mortgage foreclosures, and the corporate earnings (or losses) reports.
CBS tried to improve on that last Sunday night (January 25) with a segment of "60 Minutes" CBS called "A Town In Crisis" ("The town of Wilmington, Ohio has been devastated by the economic crisis and, as Scott Pelley reports, DHL, the town's largest employer, is shutting its domestic operation."). CBS urges you to Watch CBS Videos Online -- as do I. But it also enables me to embed a video of its segment here, where I also urge you to watch it.
Watch the tears, some suppressed and some flowing. Feel the despair, the pain, the sense of hopelessness among decent folks who've known no life except for going to work every day for decades, supporting their families, and dreaming of better lives for their children. See the faces. Recall those of your friends and neighbors, family members -- or yourself -- going through similar stress and confusion.
Then think about the uncaring, irresponsible bankers and corporate executives whose greed and ignorance brought on this pain; men and women who, instead of attempting to alleviate it with jobs, loans and restructured mortgages, are handing out pink slips to their loyal workers and handing out taxpayers' money, our money, as bonuses to their fellow executives and dividends to their wealthy investors, arranging for company retreats and parties, flying the world in their private jets (Citi just used our money to buy its executives a new $50 million-dollar plane), and doing million-dollar makeovers of their offices with extravagant furniture.
[E.g., Jennifer Gould Keil and Chuck Bennett, "Just Plane Despicable; 'Rescued' Citi Buying $50M Jet,"New York Post, January 26, 2009 ("Beleaguered Citigroup is upgrading its mile-high club with a brand-new $50 million corporate jet -- only this time, it's the taxpayers who are getting screwed -- even though the bank's stock is as cheap as a gallon of gas and it's burning through a $45 billion taxpayer-funded rescue . . ..");
Andrew Ross Sorkin, "The Titans Take It on the Chin,"New York Times, January 26, 2009 ("[That] John A. Thain, the fallen boss of Merrill Lynch, spent $1.2 million redecorating his office as Merrill hurtled toward its end seemed only to confirm people’s worst suspicions about money and the hubris it can breed. His $35,000 “commode” might strike some as a bit over the top.");
Dave Krasne, "Money for Nothing,"New York Times, January 26, 2009 ("Merrill Lynch lost $27 billion last year, and yet still managed to rush through $4 billion worth of year-end bonuses in the days before it was taken over by Bank of America. . . . Merrill Lynch is not the only irresponsible institution out there. Despite a year of record losses, despite all the taxpayer money being injected into our financial institutions, bonuses for 2008 were, in some cases, down less than 50 percent from those the previous year. . . . [S]ome institutions that begged for taxpayer aid to stave off bankruptcy — simply to stay alive — made 2008 compensation packages their first order of business after receiving their bailouts. . . . [I]t’s one thing to reap great rewards when creditors are being repaid and shareholders are earning a return; it’s quite another to reward failure almost as well.");
Andrew Ross Sorkin, ed., "Cuomo Subpoenas Thain Over Merrill Bonuses,"New York Times/Deal Book, January 27, 2009 ("Andrew Cuomo, New York’s attorney general, said Tuesday that he has subpoenaed John A. Thain, the former Merrill Lynch chief executive, over bonuses paid out by the firm just before it was taken over by Bank of America. . . . 'The fact that Merrill Lynch appears to have moved up the timetable to pay bonuses before its merger with Bank of America is troubling to say the least and warrants further investigation,' Mr. Cuomo said in a statement.");
Brian Knowlton, "Geithner Cracks Down on Bailout Lobbying,"New York Times/The Caucus, January 27, 2009 ("The New York Times reported that some big banks receiving government bailout money were still lobbying the government — giving the appearance, at least, of using taxpayer money to lobby for more taxpayer money . . ..").]
Given these attitudes and behavior, this fraud and sense of entitlement, it would be unconscionable to simply hand over more taxpayer money to this crowd -- not just because they have now demonstrated that "they don't deserve it" (though they don't), not just because they should be punished with prison sentences rather than rewarded financially (though they should), but because we're now into a "fool me once, shame on you; fool me twice, shame on me" scenario in which it should be abundantly clear to all that this approach hasn't, and won't, work.
Does this mean that more banks will fail? Yes. Just like more auto dealerships and retail stores will fail. But any company that's "too big to fail" is simply too big. Capitalism, "the market," contemplates failure as well as success. It will take time to calculate, but require the banks to put a marketplace value on those "toxic assets." They're worth something. And at that point offer those assets -- or the entire bank itself -- for sale in the marketplace. It will fetch something. And once it's fairly valued there will be buyers, there will be investors, there will be capital, there will be loans -- and it will all have been done with market forces and without additional taxpayer dollars.
Watch this "60 Minutes" piece and then ask yourself, "Just what would be the best way to 'stimulate our economy' if one were to focus not only on the most efficient economic tools but also on the human misery of the poor rather than the worries of the wealthy?"
In an economy in which two-thirds to 70% of the fuel in our economic engine comes from consumer spending, when that engine starts sputtering might it not be a good idea to provide it more of that fuel? [See, e.g., Michael Barbaro and Louis Uchitelle, "Americans Cut Back Sharply on Spending,"New York Times, January 14, 2008 ("There are mounting anecdotal signs that beginning in December [2007] Americans cut back significantly on personal consumption, which accounts for 70 percent of the economy.")]
In 2007 the median income for men working full time was $45,000; for women it was $35,000. "Median" means that half the working men and women earned less than that; half earned more. The income of the bottom 20% of "households" (meaning the combined income from all sources for all household members aged 15 or over) was less than $19,000 -- and a half of such households had no wage earner as such at all. See, e.g., "Household Income in the United States," Wikipedia.
Thus, intuitively it would seem the best way to stimulate the economy -- humane considerations aside -- would be to put money in the hands of those most likely to spend it: those below the median among wage earners. Food Stamps and Unemployment Compensation programs come immediately to mind.
Given the economic plight of the folks featured in CBS' "A Town in Crisis" it's just highly unlikely that they would use the money to buy failing banks, pay bonuses to wealthy corporate executives, buy corporate jets, or hoard it in an effort to increase their "reserves." They'd probably spend it -- promptly, and entirely.
It turns out that food stamps are at the top of his list, providing $1.73 worth of economic activity for every dollar spent.
Next are unemployment benefits, with a $1.64 impact from every dollar we spend.
(By contrast, the tax-cutters' favorite current proposal, an acceleration in businesses' depreciation write-offs, produces only 27-cents worth of economic activity for every taxpayer dollar lost.)
Not only do food stamps and unemployment benefits return the most per taxpayer dollar, they also do it faster than any other approach.
(Temporarily funding states, enabling them to avoid deep budget cuts, produces $1.36 of activity for each federal dollar.)
Triage: First Stop the Bleeding
"Triage" is a useful concept for thinking about what we need to produce an economic recovery. ("Triage is a process of prioritizing patients based on the severity of their condition. This facilitates the ability to treat as many patients as possible when resources are insufficient for all to be treated immediately." "Triage," Wikipedia.)
Food stamps and unemployment compensation are something that is needed immediately, can be provided immediately (the programs are already in place and operating), will help the greatest number of people, and will have the greatest positive impact on the country's economy.
They need to be fully funded with whatever it takes -- and "whatever it takes" will be far less than what we've already squandered on corporate CEOs and bankers. Both food stamp and unemployment compensation programs need to be expanded in both reach and amount until they provide some assistance to everyone reasonably eligible.
With news of layoffs by the thousands coming every week, this needs to be our first priority, our primary focus, until it's running smoothly, doing what needs to be done.
[See, e.g., Catherine Rampell, "Layoffs Spread to More Sectors of the Economy,"New York Times, January 26, 2009 ("Home Depot, Caterpillar, Sprint Nextel and at least eight other companies announced on Monday they would cut more than 75,000 jobs in the United States and around the world — a gloomy start to the workweek for employees anxious about holding their own as the economy sinks.")]
Second, Provide Health Care
Why should health care be second? Not because it's less important -- from either an economic or a humane perspective -- but because it will take somewhat longer to create the administrative procedure to provide. With 40 million Americans left uninsured in the best of times, laid off workers often losing what health insurance they had along with their wages, and health care costs a major factor in bankruptcies, temporary funding of health care for all -- by whatever means -- is an essential next step. This need is not met with a little extra funding for SCHIP, COBRA and Medicaid, requiring some amount of co-pay from those who can't even afford food. It must be fully funded to provide basic medical care to everyone who is unemployed or otherwise unable to pay hospital and doctor bills -- and with as little administrative paperwork for patients and doctors as possible.
Third, A Jobs Program -- for Workers Not Owners
How can I make jobs third? Isn't it better that people be paid for their work than that they get unemployment compensation for doing nothing? Absolutely; of course. Indeed, some months ago I urged the creation of a federal jobs program, in place, ready to roll out on short notice, when needed. Well, now it's needed and it's not in place. And so, like health care, that's the only reason it's third rather than first.
The reason I emphasize "workers not owners" is because a program designed to put Americans back to work needs to prioritize, needs to employ the maximum number of persons per dollar possible. And that may mean federal jobs programs that make worthwhile contributions to our infrastructure, or whatever, but would not necessarily be the projects, and jobs, that "the marketplace" would choose.
Frankly, I don't know how many jobs per dollar are created by highway projects these days. But what I guess is that a "shovel-ready" project that would have employed 200 workers with shovels in the early 1930s may very well, today, primarily enrich the owner of the construction company and employ one person who is operating an extremely large shovel and other earth moving equipment.
Fourth, Mortgage Refinancing -- For Owners, Not Bankers
Would I like to see more people able to continue living in their homes? Of course. But the details of how we do that are not easy. At least I don't have any quick solution that keeps in proper balance the remedies for those who knowingly got in over their heads, those who were taken advantage of by bankers, those who have struggled to make every mortgage payment, and those who have been profligate with other expenses. But clearly, it seems to me, no one gains -- not the home "owners," the bankers, or the real estate agents -- by throwing the occupants out on the street in a down market when a resale will result in more losses for all. Nor, as we've now seen to our multi-hundred-billion-dollar regret, can the problem be solved by giving billions to bankers who simply squirrel it away, or use it to buy other banks, enrich CEOs, and pay dividends.
Infrastructure Projects and Tax Cuts
Any project can be said to be an "economic stimulus" and that seems to be a lot of what's going into the President's, Senate's, and House's proposals: pet projects of elected officials' major campaign contributors. That looks to me more like "same old, same old" than "Change We Can Believe In."
Some of these are worthy projects. Certainly I'd prefer that Interstate Highway bridges not collapse.
But what we need now, first, is economic recovery, as quickly and wisely and efficiently as we can get it done. Diverting attention -- and more important, dollars -- from that goal to other purposes, however worthy, both takes our eye off the ball and seriously (and perhaps disasterously) weakens our ability to do the job at hand.
Tax breaks I've discussed above. They do little to produce economic recovery according to the economists. And worse, they violate the principle that "when you find yourself in a hole the first thing to do is to stop digging." It is "credit" and debt that got us into this fix. It's not clear that we can borrow our way out of a problem of excessive debt.
What this country needs right now is not more credit, more borrowing by its citizens and federal government. What it needs is more cash -- in the hands of consumers, not CEOs. Indeed, consumers are the only ones who can turn this economy around. And that's what the steps I've outlined here can do.
Finally, there are benefits and there are costs. Our public and corporate officials, and the mass media, have explained to us the benefits of massive expenditures. What they have not explained are the costs -- such as the potential of a "morning after" rampant, uncontrollable inflation, the likes of a Third World country. I'm not saying that will happen, or that it's the only possible scenario. What I do believe is that someone, sometime, somewhere needs to talk candidly about the "business plan" behind this massive spending, the "exit strategy," the projected mileposts and stages along the way -- and the serious, possible, risks we are taking.
“The cost of our debt is one of the fastest growing expenses in the federal budget. This rising debt is a hidden domestic enemy, robbing our cities and states of critical investments in infrastructure like bridges, ports, and levees; robbing our families and our children of critical investments in education and health care reform; robbing our seniors of the retirement and health security they have counted on. . . . If Washington were serious about honest tax relief in this country, we'd see an effort to reduce our national debt by returning to responsible fiscal policies."
* 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. -- Nicholas Johnson
As the sun slowly rose this morning it truly was "a new day."
My time in a segregated South during the 1950s -- Austin, Houston, and then traveling through Louisiana, Mississippi, Alabama, Georgia and Florida with the U.S. Court of Appeals, 5th Circuit, Judge John R. Brown for whom I was clerking -- with "Whites Only" signs in restaurants, "white" and "colored" water fountains, a racially administered poll-tax system to keep African-American citizens from voting, and the KKK's crosses burned in Fifth Circuit judges' lawns, meant that I, too, had a dream that yesterday would someday come to America. And now it has. Surely it was a much more special day for those whose ancestors were slaves, but it was a day that all Americans could celebrate with pride -- and did.
Beyond that, there is little unique that I could add to the millions of words and pictures from millions of Americans about January 20 -- in emails, blogs, conversations between themselves, and the mainstream media -- so I won't spoil it by trying.
Below, however, is another of what was a moving inaugural moment for me. Pete Seeger who has been giving of himself to movements and progress since I suppose the 1930s; Pete Seeger, with whom I appeared in rallies in the 1960s and '70s, and in whose home we've visited; Pete Seeger, at 92 or 93, beaming at the thousands before him at the Lincoln Memorial who had helped make this inauguration possible; Pete Seeger, who had done it probably thousands of times before, leading a crowd in a very triumphant group singing of "This Land is Your Land."
What would you do?
There was a constitutional law professor's moment yesterday during the swearing in. I'm sure you caught it, but you may not have thought about its possible significance.
The Chief Justice, John Roberts, "administers the oath of office" that turns a "president-elect" into a president.
Article II, Section 1, Paragraph 8 of the Constitution provides:
"Before he enter on the execution of his office, he shall take the following oath or affirmation: - "I do solemnly swear (or affirm) that I will faithfully execute the office of President of the United States, and will to the best of my ability, preserve, protect and defend the Constitution of the United States."
The need for this oath would seem to have been modified by the 22nd Amendment, which provides simply, "The term of the President and Vice President shall end at noon on the 20th day of January . . . and the terms of their successors shall then begin."
Without that interpretation, the United States would have been without a president from noon until about 12:05 p.m. yesterday -- since the terms of Bush and Cheney "shall end at noon" and President Obama could not "enter on the execution of his office" until "he shall take the following oath." Thus, Obama became president at "noon on the 20th day of January" with or without an oath.
If that is not the proper constitutional interpretation there is then a remaining reasonable question as to whether President Obama did, in fact, take the oath required by Article II, Section 1.
The Chief Justice recited "I do solemnly swear that I will execute the office of President to the United States faithfully . . .." Obama, a former constitutional law professor and newly elected president, presumably knew the Chief Justice had misspoken. He paused. What to do? With all the planning, every detail attended to, two or three days of celebration without a hitch, what President-elect could be expected to have prepared for the possibility the Chief Justice would screw up the oath of office in this unanticipated moment? The Chief Justice attempted to recover. Obama, confronted with the choice of reciting the oath as written, thereby embarrassing the Chief Justice of the United States, or reciting the oath as presented to him by the Chief Justice, chose the latter -- thereby failing to take the oath contained in the Constitution.
One would have thought the Chief Justice would either have previously known the oath; or if not, read and memorized it ahead of time; or if not, had an accurate copy from which to read, and -- if he feared nervousness on such an occasion -- practiced reading it correctly ahead of time.
But judges, even Chief Justices, aren't consistently perfect. I recall an occasion when clerking for Justice Black that I walked into his office and found Chief Justice Warren and Justices Black and Harlan staring at the bound Supreme Court opinions on Black's shelves, unable between them to think of the case they were trying to remember. Justice Black was known for the little dog-eared copy of the Constitution he always carried in his coat pocket. When Eric Sevareid and Martin Agronsky interviewed him for a CBS documentary, Martin asked him, "Mr. Justice, why do you carry that Constitution with you? I would think by now you'd know it by heart." Justice Black replied, with his famous smile, "Because I don't know it by heart." Apparently neither does Chief Justice Roberts.
(The error is easily remedied, if thought necessary, as it has been in the past -- if one doesn't wish to rely on the 22nd Amendment interpretation -- by President Obama's simply taking the oath, correctly, a second time, which could be in a small private ceremony if adequately documented. [That is what they ended up doing later on Wednesday: Jeff Zeleny, "I Really Do Swear, Faithfully: Obama and Roberts Try Again,"New York Times, January 22, 2008.])
What would you have done in that situation? __________
* 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. -- Nicholas Johnson
As Iowans continue to mourn the firing of the likes of the Register's Brian Duffy and the Press-Citizen's Bob Patton, along with dozens of their colleagues at those papers and the 15,000 laid off nationwide, things are looking pretty bleak for the newspaper industry generally all across the country.
In 2007 there were about 110 million housing units occupied year round. From 2000-2008 the number of U.S. daily papers has declined from 1492 to 1447 (that's morning (833) and evening (614) editions, so greater than the number of local newspaper companies). During this time the total circulation has declined from 55,772,000 to 52,329,000. "Newspapers and News Organizations Marketing Research," Research Wikis. I have no idea (and can find no data) on how many of those 52 million papers go to households (as distinguished from those delivered to news stands, businesses, or are distributed free to students or travelers on trains, planes and in hotels) -- and how many of those subscriber households account for more than one newspaper (in my case there are four, plus of course a variable additional number of online papers). But it seems clear that far fewer than 50% of American households subscribe to even one paper.
(Richard Perez-Pena, "Newspaper Circulation Continues to Decline Rapidly"New York Times, October 27, 2008: "The long decline in newspaper circulation over the years continues to accelerate, with sales in the spring and summer falling almost 5 percent from the previous year, figures released on Monday show, deepening the financial strain on the industry -- from 1.9 percent for The Washington Post, to 13.6 percent for The Atlanta Journal-Constitution . . . circulation at The Houston Chronicle, The Boston Globe, The Star-Ledger of Newark, The Philadelphia Inquirer, The Orange County Register and The Detroit News fell 10 percent or more. The exceptions . . . were USA Today and The Wall Street Journal, . . . virtually unchanged, at 2.3 million for USA Today and 2 million for The Journal on weekdays.")
Couple the decline in readership with the even greater decline in advertising revenue, the rising costs for printing and distribution, the loss of the classified advertising revenue to the likes of Craig's List, the seeming need to give it all away for free on the Internet, and Wall Street's demand not only for beter-than-average-Fortune-500 rates of return, but ever-increasing rates of return, and it's a wonder there are still any newspapers out there. Mark Fitzgerald, "'Several Cities' Could Have No Daily Paper As Soon As 2010, Credit Rater Says,"Editor & Publisher, December 3, 2008 ("Newspaper and newspaper groups are likely to default on their debt and go out of business next year -- leaving "several cities" with no daily newspaper at all, Fitch Ratings says in a report on media released Wednesday.") Bill Boyarsky, "The Newspaper Industry Is Dying Before Our Very Eyes," Truthdig, AlterNet Media & Technology, December 18, 2008.
All of this raises a number of issues.
First off, as a law school colleague is occasionally driven to ask a classroom of silent students, "Is anybody listening? Does anybody care?"
Few today miss the disappearance from the marketplace of the horse-drawn buggy industry -- aside from the Amish, and they make their own. Automobiles, and public transportation, filled the transportation gap and took their place.
Are there any reasons to believe the disappearance of the newspaper industry would be of any greater significance, or any less likely to be replaced by something else?
The answer turns, in part, on how one defines "newspaper."
I once sat next to a sliderule salesman on an airplane at a time when transistors and hand held calculators were beginning to come on the market. Needless to say, he had a warehouse full of some really beautiful sliderules with which he was willing to part at a discount. I had been brought up on calculation by sliderule, but passed by his offer.
It was not sliderules that were essential to American science, engineering and business; it was the ability to do calculations.
So it is with newspapers. It is not necessarily still essential that we chop down trees, grind them into wood pulp, create multi-ton rolls of newsprint, ship them by truck, rail, ship, and truck again, to gigantic printing presses, where it is inked, folded, bundled and put on trucks, dropped off for delivery persons, who in turn drive around town dropping individual newspapers on subscribers' doorsteps.
What is even more essential that the ability to do calculations, however, at least in my view, is the citizens' ability to get access to information, opinion and what we call "investigative reporting" in a self-governing democracy.
Our nation's founders, led by Thomas Jefferson and James Madison, recognized this central necessity -- and not just in the First Amendment ("Congress shall make no law abridging the freedom of speech, or of the press"). They saw the need for an educated citizenry, which ultimately led to a system of free public schools, and public libraries. (Jefferson helped create both the University of Virginia and the Library of Congress.) The postal system, with reduced rates for books, magazines and newspapers, was a part of this philosophical package, as was the ultimate licensing of broadcast stations to serve "the public interest." They knew that expanding the franchise (at first limited to white, male, landowners, over 21 -- ultimately expanded to include African-Americans, then women, then everyone over 18) would count for little without an informed electorate.
Given today's policy challenges, I continue to believe that the information gathering, processing, editing and distribution function continues to be, if anything, even more essential than it was 200 years ago.
And in addition to newspapers' role as newspapers, they also play a major role in the functioning of all media. I used to say of the evening news programs on ABC, CBS and NBC that their content was determined by morning editorial conferences at which all the participants had read the New York Times and then sat around deciding which stories they'd take pictures of that afternoon and put on the air that evening. Obviously, it's not quite that bad. But the Times is a kind of "newspaper of record" not only for our country but for the world (along with other great world newspapers); it is a repository of history as well as a serving plate of current happenings. Look at your local paper; how many of its stories come from this guy whose initials are "AP"? Who is he? He's hundreds or thousands of reporters working -- or at least who used to be working -- at newspapers all across this country that belong to the Associated Press and offer up their stories for other members' papers to use. Few if any local radio or television stations, or even networks, have journalistic resources remotely approaching those of the nation's large, urban papers -- or at least the resources they used to have. So to the extent we lose our papers we have also lost the network of journalists that supports all media (and individuals) that need or want the information newspapers provide.
But while I'm part of that small group who loves the feel of a newspaper in my hands in the morning, I also recognize that the "newspaper manufacturing industry" of my youth is not the only way our society can perform that informing function.
What do we mean by "the newspaper business"? The executives of every for profit enterprise need to ask themselves, in bad economic times as well as good, "What business are we really in, or do we want to be in?" Are we in "the steel business" or the "building materials business"? Are we just in the "department store business" or should we also be offering groceries for sale?
Stephen Buttry is clearly doing some of this kind of thinking for Eastern Iowa's paper, The Gazette. He and his staff have identified, and begun focusing on three or four separate businesses. Their response to newspapers' hard times is a willingness to "fundamentally transform" their company.
Of these four businesses, or functions, the first is information gathering; the input of others' information and opinion (news releases, statements at news conferences, online reporting), interviewing, observing, researching reports and other documents (primarily on the Internet, but elsewhere as well) -- and then writing it up as journalists and editors do, or simply present it raw.
The second is the multiple packaging of this information and reporting: much of it would simply be made available online as reference/research material; but there could also be a hard copy newspaper, a less-than-daily "magazine," supplements, advertisers (such as their "Penny Saver"), books, or sports publications. (One of the most potentially profitable things to think about are the multiples more "packaging" possibilities.)
The third is production: the creation and updating of Web pages and blog services, maintenance of the servers; the printing presses operation and maintenance; delivery services, whether by computer, truck, sidewalk boxes, or home delivery.
The fourth (as I break it down, but a part of the third in Buttry's conception) is the financial side of the business: sales of product, subscriptions, and advertising; the advertising and marketing of the various products; customer service; and collections.
This kind of thinking is not enough to make a "newspaper" profitable -- as Buttry seems to be the first to acknowledge. There are a lot of details to deal with between point "A" and point "B."
But it is an essential first step for which I think The Gazette is entitled to a lot of credit. Any corporate enterprise that continues to think of itself as being in the "newspaper business" in 2009 is probably in for tough economic times. Thinking of itself as being in the information gathering, packaging, production, and marketing businesses is not the only possible conceptual scheme, but it is a good one (in my opinion).
The survival of print. Hard copy papers have not yet totally disappeared, even if they've laid off reporters, lost circulation and advertisers. It's interesting, as noted above, that the Wall Street Journal is more than surviving. In part that's because at least a hard core of its readers can probably afford whatever the owners might like to charge subscribers, and advertisers are willing to pay handsomely to reach them. But it's also because the WSJ serves a niche, albeit one that is evolving. Visiting with Jim Hightower a couple days ago (here in town for an Iowa Corngrowers' gathering) we talked about his newsletter, which is doing quite well. I suspect there will continue to be a market for specialized, hardcopy newsletters. And some are suggesting that, however small the readership might be, it may be -- at least for a long time -- economically feasible for today's conventional newspapers to continue to publish and deliver hardcopy papers to the market that wants them, and is willing to pay for them the full cost of production, distribution and some profit.
Special interest publications. Some newspapers even today continue to have the words "Democrat" or "Republican" in their names. And there are thousands of other organizations, such as churches, and trade unions -- that will continue, or start, providing their members (and any subscribers) with hard copy reporting. About 30% of households get their television off the air. (These are the folks for whom the conversion to digital TV presents a challenge.) Something like half American homes don't have broadband Internet access. These folks will continue to be a market for hardcopy delivery of news and information, either from whatever future "newspapers" may look like, or from an organization to which these readers belong.
Blending print and online. Another model is to retain some home delivery (just not seven days a week) along with online distribution, like the Detroit papers are doing. The New York Times now offers a "special" on a Friday, Saturday, Sunday only package of delivery, thereby cutting the production and distribution costs by more than half (while possibly picking up some new subscribers who would not have wanted the paper every day, but welcome having three papers over the weekend -- and at a much reduced cost).
All online all the time. Finally, there is the Christian Science Monitor model: abandon hardcopy altogether, offering nothing but online content -- while updating it 24/7.
Home printing. I have a law school colleague, with expertise in the newspaper business, who has been urging papers for years to consider the possibility of putting printers in the homes of subscribers. Editorial (news) only accounts for about 15% of the cost of producing a newspaper. I don't know what percentage goes into producing and transporting newsprint, the printing presses, the printers' ink, and the transportation and delivery of the individual papers -- but it has to be enormous. And think about it: to receive television programs you must invest in a TV set (and these days a monthly payment for the entirety of your life to a cable company); householders have a significant portion of the capital investment in the television industry. All you need contribute to get a newspaper is a front step. The cost savings for the industry could be significant If those who want or need a hard copy of their newspaper would assume the cost of printing it in their homes. The New York Times now offers to deliver the entire paper, as each page is made up and appears in hard copy, to your home, everyday, for $175 a year (a substantial reduction from the hard copy price, if indeed the paper is even available for home delivery in your town). Admittedly, this is not the same as a printed copy, but it gives you an idea of what large, printer-ready copy might look like.
The blogosphere. Whether blogs cause you to sneer, or you view them as a form of "journalism," the fact is that they are already playing a role in the newspaper industry.
Most papers have online blogs created by their reporters and editorial writers, to which many add the blogs of ordinary citizens as well. Many papers provide readers access to the online reproduction of reporters' stories as a form of blog, to which readers may add their own "comments" about the story (and increasingly about each others' comments as well).
Blogs, including this one, certainly look to the mainstream media for information, quotes, and stimulation of ideas to write about. And there is a least some contribution the other direction -- as when bloggers got after Dan Rather for CBS' acceptance, and reporting, of what turned out to be a faked document regarding President George W. Bush's "war record," or as John Neff notes in his comment, below, when the mainstream media made use of the "here comes everybody" still and moving pictures of the recent Airbus "water landing" on the Hudson River.
The blogosphere is an example of Clay Shirky's Here Comes Everybody (2008). It does not require a hierarchial organization to be created or to survive; anyone can contribute and almost no one makes money from doing so. "On the Media" reported this weekend on Josh Karp's "The Printed Blog," an effort to pick from blog entries and offer them in printed form. Of course, "Google" in general, and "Google Alerts" in particular, enable anyone to create the equivalent as an online service -- and this is already being done; see e.g., BlogNetNews.com and Blog for Iowa.
The blogospher may not be to newspapers what the automobile is to the horse and buggy (that is, not only a replacement, but an improvement) but with enough participants, including the laid-off professional journalists (who will now need other sources of income to survive, but will still have some spare time and a desire to write), and more packaging/editing services, the blogosphere could fill at least some of the hole left with the disappearance of papers.
Make Google pay. For a mini debate about the wisdom, propriety and effectiveness of newspapers insisting on payment from Google for its ability to list their content, see Eric Etheridge, "Virtual Face-Off: What Does Google Owe Newspapers?"New York Times, February 4, 2009.
Sell online access to content. Since advertising revenue from newspapers' online content hasn't been the equivalent of what the hard copy ads once produced, one option is to try to move today's online freeloaders into the category of paying subscribers. This has not been easy. I at one point suggested the idea of an ASCAP model -- that is, for an annual flat fee one could examine any newspaper's online content, with a proportion of that fee (based on the proportion of hits on that newspaper's Web site to the total hits on all newspapers' Web sites) going to the papers you access. On reflection, that idea may be even more difficult to sell than the pay-per-paper approach. A more viable, and easily established, approach -- that is already being used -- is to give away most of the content while holding back some for which pay is required (for example, some of the New York Times' archives).
Sell the features, not the content. Another approach is to offer the content for free, as now, but sell the value-added features such as archives, special search tools, email alerts, delivery to cell phones and handheld devices -- while trying to think up and offer more such features.
Governmental subsidy. Finally, there is the occasional suggestion that if the government can provide a significant share of the funding for public broadcasting, and can provide bailouts for "essential" industries like investment bankers and automobile executives, it ought to be able to provide some subsidy to a truly essential industry: newspapers. My guess is that this is a non-starter, not the least of the reasons why being what I predict would be the opposition of the newspaper industry itself.
Endowments. [Jan. 29, 2009] After this blog entry was written I came upon another proposal: endowment funds to support newspapers. The authors estimate this would require something on the order of a $5 billion-dollar endowment for the New York Times alone which, in today's economy, might be a little difficult to raise on short notice from wealthy Times fans. But I thought the proposal worthy of inclusion here. David Swensen and Michael Schmidt, "News You Can Endow,"New York Times, January 27, 2009.
For a thoughtful discussion of these issues from a couple years ago by some of the industry's leaders, not inconsistent with the kind of approach I've explored here, see "Challenges to the Newspaper Industry: A PEJ Roundtable," Pew Research Center's Project for Excellence in Journalism, July 24, 2006.
At this point in time there's no way of predicting for sure which route the failing newspaper industry will go. Many of the major players may have disappeared entirely. Others will be transformed into something barely recognizable. Other new start ups will have evolved -- not unlike Apple's emerging competition with the behemoth IBM nearly 30 years ago.
Whatever the path, we self-governing American citizens will continue to need diverse, independent and impartial gathering of data and reporting of information and access to wise opinion. Of that I am sure. __________
* 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. -- Nicholas Johnson
The blogs posting the pictures appear to be associated with fans of the Hawkeyes' rival, the Cyclones of Iowa State. See, e.g., "Cyclone Fanatic" and "Ball Hype."
As of this morning (January 15) the Register's January 14 story about the resignation had some 75 comments from readers. The focus of most-to-all of them was on Podolak's behavior, whether it was utterly unacceptable or within bounds, Podolak's abilities as a football player and popularity as a commentator, whether he had in fact been fired by UI Athletic Director Gary Barta and, if so, whether that was an over reaction -- along with the usual ad hominum comments about Barta and by those making comments about each other.
Those issues, at least some of which are quite significant, are not the subject of this blog entry. Its focus is, rather, (1) journalistic ethics, (2) defamation and privacy, (3) the impact of digitization, and (4) what Clay Shirky characterizes as, in the title of his book, Here Comes Everybody: The Power of Organizing Without Organizations (Penguin Press, 2008).
1. Journalistic Ethics: Learfield, the University of Iowa, and the selection of sports announcers. Blaming the media for one's misfortunes is commonplace -- especially among losing politicians. But contrary to media critics' assertions "journalistic ethics" is not an oxymoron. The Society of Professional Journalists has a Code of Ethics. It provides, among many other things, that "Journalists should,"
— Distinguish between advocacy and news reporting. Analysis and commentary should be labeled and not misrepresent fact or context. — Distinguish news from advertising and shun hybrids that blur the lines between the two. . . . — Avoid conflicts of interest, real or perceived. — Remain free of associations and activities that may compromise integrity or damage credibility. — Refuse gifts, favors, fees, free travel and special treatment, and shun secondary employment, political involvement, public office and service in community organizations if they compromise journalistic integrity. — Disclose unavoidable conflicts. — Be vigilant and courageous about holding those with power accountable. — Deny favored treatment to advertisers and special interests and resist their pressure to influence news coverage. — Be wary of sources offering information for favors or money; avoid bidding for news.
In other words, if Podolak isn't paid by the University of Iowa -- and at least he doesn't seem to appear on the UI's salaries list -- how does it come to pass that whether he continues to work, or not, for Learfield Sports is a matter of concern to the University's Athletic Director? Sure, just like Sarah Palin has her opinions about Katie Couric, Gary Barta might very well have opinions about various sports reporters, print and broadcast. But this is being talked about as an issue of whether Barta "fired" Podolak or whether he just resigned. Andy Hamilton, whose Press-Citizen story is linked from the top of this entry, reports Barta as saying, "We’re going to be looking for somebody, frankly, that does what Ed was able to do." Doesn't that kind of sound like Barta will be hiring a Learfield employee?
If Podolak is in fact a journalist, of sorts, on the payroll of a broadcaster, isn't it an ethical issue if the broadcaster and reporter permit the subject being covered to dictate the terms of that coverage?
Now I would be the first to concede that I am unfamiliar with whatever the terms of the Learfield Sports-University of Iowa relationship may be (presumably contained in a contract of some sort). And I am equally uninformed about how sports reporters think of themselves; maybe they, their editors and publishers, don't consider them "reporters" or "journalists" at all, and thus the SPJ Ethics standards are inapplicable. Or maybe print sports reporters are journalists, but on-air radio and TV sports reporters are not journalists. Maybe it's considered expected and appropriate that they be paid by -- or otherwise have an affiliation of some sort, or be capable of being fired by -- one or another team. Maybe they are supposed to be a part of the cheer leading squad.
But somehow I can't imagine the Press-Citizen accepting an arrangement in which the University could dictate which print reporters would cover the athletic program -- but then I'm occasionally naive.
Not knowing those things, I'm not criticizing anybody. But I was perplexed by the involvement of the University's Athletic Director in the hiring and potentially firing -- indeed having anything to say about -- who does and does not report on (or cheer lead on the radio for) Hawkeye football games covered by an independent broadcaster, Learfield Sports. The Learfield Sports Web site has this to say about "Hawkeye Sports Properties":
Hawkeye Sports Properties (HSP), a property of Learfield Sports, is the official multi-media rights holder for the University of Iowa Athletics. HSP presents the excitement, color and pageantry of college athletics through advertising, marketing and promotional opportunities aimed at making an impact on your business by reaching the loyal Hawkeye fans and alumni throughout the state of Iowa.
I would assume that the Wall Street Journal would not let the Bank of America CEO pick which reporter covers their acquisition of Merrill Lynch, or the Washington Post let Congressman Barney Frank pick which reporter covers his role in promoting Bailout II.
So why should the Iowa football team be able to pick which on-air personalities describe their prowess on the football field?
2. Defamation and privacy. No lengthy essay from me this morning on these subjects, except to note that the Register chose not to show the picture/s in question because the young woman was unidentified and the paper couldn't be confident she was a "public figure." Podalak presumably would be. Note also, as did some of the comments on the Register's story, that public figures need to be more circumspect about their behavior, and are more likely to be photographed, because there is both more legitimate and illegitimate public curiosity about their lives and behavior.
3. Impact of digitization. The impact of a digital photograph on Podolak -- loss of job, major media coverage, embarrassment -- is reminiscent of former Secretary of Defense Don Rumsfeld's reponse to the photos from Abu Ghraib in his U.S. Senate testimony: "There are people running around with digital cameras, taking these unbelievable pictures, sending them out . . .." Wolf Blitzer Reports staff, "Rumsfeld testifies before Senate Armed Services Committee," CNN, May 7, 2004.
In other words, the problem was not what was done at Abu Ghraib, the problem was the online distribution of pictures of what was done at Abu Ghraib. Similarly, one suspects that, without the party pictures of Prodolak, the events themselves would not have been reported -- or, if they were, would have had much less impact.
Not only are there single-purpose digital "cameras" as such, now with the convergence of digital devices and technologies of all kinds there are also "digital cameras" in everything from cell phones to laptop and hand held computers (PDAs) -- millions of them.
Just one more example of the way digitization (along with the 99.9%-off sale) is changing our lives, social relations, and what the law calls a "reasonable expectation of privacy."
4. Here Comes Everybody. Clay Shirky's new book, Here Comes Everybody: The Power of Organizing Without Organizations (Penguin Press, 2008), is a must-read for anyone in the academic community, business, government or politics who needs to understand and function within an Internet-driven Information Age.
This is not about to become a book review, or summary of his thesis and dozens of examples. It will suffice for our purposes to note the sub-title: "The Power of Organizing Without Organizations." The Internet (and its "architecture" that enables all kinds of software to run on it) makes it possible for single individuals to organize, share information, and take action -- to have an impact -- without being directed as participants in a hierarchical organization. "Meet-Up" is just software, used by whoever wants to use it; there's no Meet-Up, Inc., CEO, with a staff of screeners to seek and select those who will and will not be permitted to have groups. Ditto for Yahoo! Groups. Wikipedia is also just software that has evolved into a popular encyclopedia created by a number of otherwise disconnected individuals who write, and revise, its content. Individuals' Web sites, blogs, Facebook and My Space pages, online photo albums and YouTube have proliferated the number of still and moving images that can be uploaded by, and potentially available to, anyone with Internet access and curiosity.
Podolak's problem -- or at least its photographic element -- is but one of the more recent and dramatic local examples of the consequences of letting everyone into the game in a digital, Internet Age. __________
* 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. -- Nicholas Johnson
