. . . 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.
From Nation's Economy to Iowa City's Theaters Approach Should be Similar (Brought to you by FromDC2Iowa.blogspot.com)
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:
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.
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."
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," USINFO.state.gov, June 26, 2007.
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.
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 Kiva.org, 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 http://www.kiva.org, 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.
Madoff and Bernanke: Bad Apples or Poster Ponzis? (Brought to you by FromDC2Iowa.blogspot.com)
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.”
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?
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.
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).
Harkin Didn't Write Again Today (Brought to you by FromDC2Iowa.blogspot.com)
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.
"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.
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.
Sadly,
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."
$14 Billion Bridge Loan to Nowhere Collapses Why? Now What? And Today's Quick Fix for . . . The Economy Brought to you by FromDC2Iowa.blogspot.com
Why did the $14 billion loan to Chrysler and GM fail to pass?
Because rational analysis prevailed over political expediency.
Great.
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.
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.
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.
Commentary:
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:
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.
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. . . .
Three Quick Fixes to Three Seemingly Intractable Problems An Entry in FromDC2Iowa.blogspot.com 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?
December 8, 2008, 6:40 a.m., plus other changes throughout the day; a revision of and numerous updates to the entry of December 7, 2008, 12:10 p.m.
Gannett's Disastrous Decisions (A Blog Entry of FromDC2Iowa.blogspot.com)
A CEO's gotta do what a CEO's gotta do.
But there's a right way and a wrong way to go about it. Given the choice between the two Gannett has chosen the wrong way.
These are tough times for the newspaper industry -- along with everybody else.
"Venerable newspaper chain Knight Ridder was swallowed in June 2006 by rival chain McClatchy Co., which has since watched its stock price lose 90 percent of its value. Over the same period, shares of The New York Times Co. are down more than 60 percent, while shares of The Washington Post Co. are down more than 40 percent." So the Washington Post reported in the body of its story about what appears to be the Tribune's impending bankruptcy. Frank Ahrens, "Debt-Ridden Tribune Co. Considers Bankruptcy,"Washington Post, December 8, 2008, p. A1. ("The Chicago-based company owns a coast-to-coast empire with television stations and newspapers in most of the nation's largest cities. Its holdings include the Los Angeles Times; cable television super-station WGN in Chicago; the Baltimore Sun; and WDCW-50 in Washington, the CW affiliate. The company even owns the Chicago Cubs.")
Gannett, which owns the Des Moines Register and Iowa City Press-Citizen newspapers in Iowa as a part of its media empire, has not been immune from Wall Street's pressure for newspapers to show ever-increasing profits in a downward-spiraling economy, with rapidly declining advertising revenues, along with declining readership, and the lack of a successful business model for making sufficient profit from the online editions that make the companies' multi-million-dollar content available for free. Gannett's third quarter earnings per share were down from $1.01 in 2007 to $0.69 this year, although operating revenues for the quarter only declined from $1.8 to $1.64 billion. Broadcasting revenues were actually up 3.9% for the quarter (from $189.5 million in 2007 to $197 million this year).
Gannett's response has been to apply an across-the-board 10% layoff policy to over 80 newspapers including our Des Moines Register and Iowa City Press-Citizen. OK, I understand why some cost cutting might be preferable to Tribune's choice for how to deal with $13 billion in debt. And I understand that you can't really sell off printing presses and stay in the newspaper business -- at least not without a business model for economic survival online. So you have to let some folks go. But who you pick, and how you go about the layoffs, not only tells volumes about your character, but also about your business smarts.
The corporation's first mistake was its choice of who does, and does not, get laid off -- as the Press-Citizen's Bob Patton illustrates:
[Credit: The Press-Citizen's nationally recognized, distinguished graphics artist and editorial cartoonist Bob Patton, December 2, 2008.]
Judging by the absence of a Patton editorial cartoon in yesterday's [Saturday, November 6] paper, I fear that he may be among the 11 said to have been laid off at the Press-Citizen.
Hopefully not, because if so it's just one more classic example of big business shooting itself in the foot, getting rid of irreplaceable top quality professionals in times of economic downturn while hanging on to easily replaceable mediocre executives -- like Detroit's shrinking "Big Three" have done, bringing about their own demise.
Dubow has lived inside America's premier example of the commercial riches created by graphics in the marketplace -- television. He started his career by selling TV commercials and worked his way up through the broadcast side of Gannett. He is now the chair of a corporation that made itself famous as well as rich by creating the first newspaper that epitomizes color and graphics surrounding paragraph-long stories (and is purchased from a box that looks like a television set) -- USA Today. You would think that Dubow, more than most corporate executives, would see the necessity of retaining the corporation's best graphics and editorial cartoon professionals.
Editorial cartoonists and graphics designers are on the front lines of the newspaper's hope for winning back readers. They should be the last to go in a newspaper's restructuring.
What scares me is that the precipitous, forceful, crude and rude removal from the Des Moines Register of beloved Iowa icon and 25-year Gannett employee Brian Duffy is now a matter of public record as a result of the KCCI-TV report last evening [December 6] and gives further reason to believe Patton may be gone as well. I understand that corporate executives are sometimes as boorish and cruel as they apparently were in this case in man handling Duffy (it's often just in their nature and training), but I've never been able to understand how they can be so stupid. ("[Duffy] has been working as a cartoonist and illustrator for more than 30 years. He has received two Best of Gannett awards, two World Hunger Media awards and was a finalist for the prestigious John Fischetti Award for editorial cartooning. His two books are A Decade of Duffy and More of Duffy, published in 1995. His cartoons are syndicated by King Features Syndicate.")
Here's video of the WHO-TV interview with Duffy December 6:
If Patton is in fact also gone it is a great tragedy for this community, Iowa, Gannett and the newspaper industry -- though hopefully, given his rich talents and job opportunity elsewhere, not for him.
The case takes on national significance because Iowa stands on the threshold of becoming only the fourth state in the United States to recognize gay marriage, and the first in the Midwest.
Recognizing this, the Iowa Supreme Court, to its credit, is making special arrangements to handle this national interest. General Information about the oral argument, including how you can get access on your laptop to live streaming of the lawyers' presentations, is available on the Iowa Supreme Court's special site.
Obviously Americans' attitudes and arguments about gay marriage are shaped by many factors and come from many directions. But among those approaches are the ones of relevance to the Court: the legal arguments. If you're curious as to what they are, the Court has made available for you the legal briefs filed with the Court by the parties on both sides.
I began my commentary two weeks ago,
That gay and lesbian couples should be permitted to enjoy the status of "marriage" has always seemed such a no-brainer to me -- whether as a matter of constitutional law, public and social policy, basic fairness, or even economic policy -- that I've not bothered to comment about it.
Now that the Iowa Supreme Court case is putting the issue back in the local news -- including Editorial, "A Case of Civil Rights," The Gazette, November 23, 2008, p. A9, and Jeff Charis Carlson, "Don't Listen to Straw Men," Iowa City Press-Citizen, November 23, 2008, p. A9 -- it's probably appropriate to remove any possible ambiguity as to my position.
And see also the Register's page one story this morning, Grant Schulte, "Gay marriage goes before Iowa high court this week," Des Moines Register, December 7, 2008.
Of course, these issues don't always go the way of the GLBT community, as they recently discovered in California with Proposition 8. But, being Californians how did they respond? Why with a musical, of course:
Well, Linda Lantor Fandel and the Register have done it again.
It was only a couple of weeks ago I was writing in praise of the paper's presentation of Finland's educational system, Linda Lantor Fandel, "An academic star: Finland's focus on education translates into top achievement,"Des Moines Register, November 23, 2008, p. OP1 -- with links to the 15 or more additional stories on the subject in the special section. Nicholas Johnson, "Satisfactions of Lively Learning," November 23, 2008, a blog entry about what we can learn K-12 education generally from "alternative education" and showcasing Mary Vasey's Gazette column, "Why Involve At-Risk Students With Theater?" The Gazette, November 23, 2008, p. A10.
These have been wonderful contributions to Iowa's efforts to recapture its once proud status as one of America's best K-12 systems -- if only school board members, superintendents and teachers will read and act on them, or better yet write the equivalent for themselves.
What do I mean by that? As I have often said, "With 15,000 school districts in the United States there is virtually no challenge confronting any one of them that has not presented itself to another district, which identified, addressed, solved and then wrote it up and put it on the Internet for others to use." In addition, of course, are the reports and research from the U.S. Department of Education, Presidential task forces and commissions, Congressional committees, national foundations and research centers, the NEA, and 50 state departments of education, as well as the education "trade press."
We don't need to hire consultants, go to winter conferences in sunny climes, or even read the Register to find out how to improve Iowa's educational system. It's all out there, available to all. Three hours on the Internet by an educator who is proficient with Google will produce more ideas than three days at a conference or with a consultant.
But given the results the Register reports from the global "Program for International Student Assessment" we need to look to other countries as well -- as the Register has been encouraging us to do.
In 2003 Finland scored first in science and reading, and second in math. Canada scored 3rd in science and reading and 7th in math. The U.S.? We were 29th in science, 18th in reading, and 35th in math.
When I was writing bi-weekly columns on K-12 education as a school board member I would occasionally write about what was going on in other countries, e.g. Bulgaria ("Much is Accomplished with Little,"Iowa City Press-Citizen, September 28, 1999), Germany ("A Good Model for Education,"Iowa City Press-Citizen, February 29, 2000, p. 11A), Switzerland ("Swiss Education Runs On Time,"Iowa City Press-Citizen, June 5, 2001, p. 9A).
The Register has provided Iowa educators, students, parents, legislators, local leaders, and the business community that depends on an educated work force a running start at educational improvement with its continual drumbeat about education -- including these two special sections on Finland and Alberta. But with all the Register does, even if we read it, that will no more solve our problems than buying a diet book at the bookstore will result in our sheding pounds.
Now it's up to us to act, in the realization that the rich rewards from improvement make "the pain of change" seem petty by comparison.
And here's an intriguing suggestion from Michigan's Michael Moore:
"You could buy ALL the common shares of stock in General Motors for less than $3 billion. Why should we give GM $18 billion or $25 billion or anything? Take the money and buy the company! (You're going to demand collateral anyway if you give them the 'loan,' and because we know they will default on that loan, you're going to own the company in the end as it is. So why wait? Just buy them out now.)" Michael Moore, "Saving the Big 3 for You and Me," December 3, 2008.
Advocates for an auto industry bailout have been asking all who question the wisdom of such a move, "How can you turn your back on the Big Three? Don't you realize how important they are to the American economy? Think of the lost jobs. Why aren't you willing to save this industry?"
Answers: I don't. I do. I have. I am.
What I don't think makes sense is a "bridge-loan to nowhere." I don't think it will save the industry, provide employment, put cars back on dealers' lots, or generate orders for suppliers.
The Big Three have already laid off 166,000 workers during the past five years. GM is proposing to lay off an additional 30,000 employees. The UAW is willing to abandon the program that supports those already laid off, and the company's contributions to funding health benefits for retirees. [Source: Bill Vlasic and Nick Bunkley, "U.A.W. Makes Concessions in Bid to Help Automakers,"New York Times, December 3, 2008; and note, with regard to the widely repeated assertion in the media that GM's market disadvantage is that it must pay workers $74 an hour compared with Toyota's $45 an hour: "Base wages between the Big Three and the foreign companies are roughly comparable, . . . $28 an hour at the Big Three compared to about $25 an hour at Toyota’s plant in Georgetown, Ky."); Steven Mufson, "As Hearings Resume, UAW Offers Concessions; Urging an Auto Bailout, Union Retreats on Terms Of Health Care, Jobs Bank,"Washington Post, December 4, 2008.]
These layoffs haven't, and won't, put GM in the black, but it will minimally cut some costs. ("[UAW President Ron] Gettelfinger asserted that labor made up only 10 percent of the cost of a car. 'To be honest with you right now, if a UAW membership went into these facilities and worked for nothing, according to our research department, it would not help the companies that much,' he said." From Mufson story, linked immediately above.)
Not only will layoffs not help, they will only make the industry's problems worse. Auto sales are down about 40%! ("Vehicle sales [for November] in the United States sank . . . General Motors, down 41.3 percent, Ford Motor, down 30.5 percent, and Chrysler, down 47.1 percent . . .." Nick Bunkley, "Another Month of Miserable Auto Sales,"New York Times, December 2, 2008.)
That's the problem. And why is that? It's at least related to the fact that 1.2 million Americans have lost their jobs this year, with another 250,000 (or more) this past month. Half of the Big Three's workforce live in Michigan, where unemployment is at 9.3% and 20% of the entire population is now dependent on food stamps and other social programs for survival.
Tell me, how is adding to the number of unemployed going to increase auto sales?
And without increasing auto sales how are these "bridge loans to nowhere" going to "save the auto industry" -- including GM's 6000-plus auto dealers, and the network of suppliers throughout the country?
If the proposed bailout would double sales, result in the rehiring of all laid off auto, dealer and supplier workers, and enable the three companies to pay back the loans in six months, that would be one thing. But it won't. GM is headed for bankruptcy; it claims to need $4 billion sometime in the next two weeks to stay in business -- and another $4 billion next month. Prospects for an immediate economic turnaround are non-existent. Even the companies aren't talking about paying back the "loans" until 2012 -- and those projections are just pulled out of their tailpipes.
There's an inherent inconsistency in the bailout advocates' argument, one of those "you can't have it both ways" problems. On the one hand they say, "Our problem is not our fault, or at least not entirely our fault, because it's been brought on by the current recession and resulting loss of sales." The conflict is that if the problem is not of their making the solution can't be either.
If they had a backlog of orders for a new model, high gas mileage car that their dealers were demanding, but that they couldn't begin building without a genuine "bridge-loan" they would be able to pay back in February, that would be one thing. A loan would solve their problem, enable the factories to start turning out cars, keep the dealers in business, the UAW workers employed, and return the corporations to profitability. But to the extent the problem lies in the downward spiraling economy and lack of consumer demand, it is a problem beyond their ability to control, and one no amount of loans will solve.
Think about it. If the economic history and prospects for a hemorrhaging business in your hometown were, while involving proportionally smaller losses, otherwise comparable to those of GM is there any local banker who would loan that business massive amounts of money one month before it was going into bankruptcy? I doubt it. So why should the taxpayers?
(Later this day [December 4] Senator Shelby made a similar observation: "The senior Republican on the panel, Senator Richard Shelby of Alabama, said the automakers’ plans aren’t 'serious' and have 'few concrete details.' 'If you made this presentation to get a bank loan I suspect that any sensible banker would summarily reject your request,' Shelby said." John Hughes, "U.S. Auto Chiefs Appeal to Congress for Emergency Aid (Update5)," Bloomberg, December 4, 2008, 13:43.)
What's Wrong With This Picture?
Of course, from my perspective, focusing on corporations rather than consumers is walking into our economic recovery efforts backwards, a "trickle-down" rather than a "trickle-up" strategy that hasn't worked so far and isn't likely to in the future.
Roughly 70% of our economy is the result of consumer expenditures. The best way to revive any given industry, including autos -- or even the entire economy -- is to get more money into the hands of people who buy stuff rather than the CEOs of corporations that are, unsuccessfully, trying to sell stuff.
There are lots of possibilities including, but not limited to, the following:
(1) increase the number of persons covered, the length of the coverage, and the amount received for unemployment compensation, food stamps, and comparable social programs;
(2) fund workers to rebuild our nation's infrastructure, such as roads, bridges, schools and parks, preferably with government-run WPA type projects, or if not that then by funding comparable states' projects;
(3) what better time to bring ourselves up to a world-class standard of health care with a universal, single payer system, the savings for consumers and corporations from which would be available for consumers to spend on other things, and for businesses to invest (and to better compete globally with companies in other countries that do have public health care programs);
(4) provide lower interest rates, different (lengthier) mortgage terms, and reassessment of the value of homes to reduce the number of foreclosures and those who were formerly homeowners becoming homeless -- Washington's latest idea is often misrepresented as providing this kind of relief when in fact, "cheap mortgages would be available only for people buying houses, not the roughly 50 million families that already have mortgages and would want to refinance at a lower rate. As a result, the plan offers no direct relief to the millions of people who face foreclosure . . .." Edmund L. Andrews, "Washington's New Tack: Helping Homeowners,"New York Times, December 4, 2008; Renae Merle, "Mortgage Distress Reaches Record Highs; Delinquencies, Foreclosures Rise Steadily,"Washington Post, December 5, 2008, 12:47 p.m. ("one in 10 home mortgages is now in some form of distress");
(5) increase the nation's reserve of brain power and global competitiveness by providing additional financial support for those (of all ages) capable of benefiting from a college education or job retraining program who are currently unable to find work and for whom the next two or three years could best be spent in a classroom enhancing their, and our nation's, skills.
Now here are some additional recent stories documenting these assertions of mine:
"On the same day that the industry reported its worst sales month in 26 years, the three Detroit automakers delivered new business plans to lawmakers in the hope of winning support for $34 billion in federal loans . . . substantially higher than the $25 billion that the three companies had initially hoped to get from Congress two weeks ago. . . .
But G.M. . . . said Tuesday [December 2] that it was in such dire straits that it would deeply cut jobs . . . as part of its plea to get $12 billion in federal loans and an additional $6 billion line of credit. . . .
G.M.’s president, Frederick A. Henderson, said the company would be insolvent if it did not receive federal assistance, including an infusion of $4 billion in cash before the end of the year. . . .
Still, the company said it would have been able to survive on its own if not for the continued deterioration of the United States vehicle market, because of the weakening economy and tight credit, which has made it difficult for consumers who do wander into dealerships to get loans.
“The company would not require government assistance were it not for the drastic collapse of the U.S. economy which has devastated the company’s current revenues and liquidity,” G.M. said. . . .
G.M. also said it planned to reduce the number of salaried and hourly workers in the United States workers from 96,000 currently, to 65,000 to 75,000 by 2012. It will also reduce its North American factories from 47 to 36, and its dealers from 6,450 and 4,700.
"The [Michigan] unemployment rate is 9.3 percent . . .. The total of Michigan residents who receive some form of public assistance, like food stamps or home heating credits, is now 1.82 million, or close to 20 percent of the population, a record for the state." Monica Davey and Susan Saulny, "Even in Michigan, Not Everyone Wants a Lifeline,"New York Times, December 2, 2008.
The Fed's "beige book," a compilation of anecdotal reports from businesses across the nation published roughly every six weeks, found that "overall economic activity weakened across all Federal Reserve districts since the last report."
Consumer spending weakened almost across all sectors of the economy, especially for vehicles. . . . Services business "generally contracted in most districts."
Part of the problem was that lenders have continued to restrict credit. "Credit standards rose across the nation," the beige book said, "with several districts noting increases in loan delinquencies and defaults, especially in the real estate sector." . . .
[P]rivate businesses shed 250,000 jobs in November on a seasonally adjusted basis. It was the biggest drop in seven years and "offers evidence that the labor market continues to weaken," ADP Employer Services said in its monthly payroll survey [Automatic Data Processing, "National Employment Report"].
Based on data from nearly 400,000 companies, the report showed employment declines across the board as large, medium-size and small companies shed jobs, and employment contracted in all sectors of the economy. . . .
The numbers from the ADP report are "terrible," wrote Ian Shepherdson, chief U.S. economist with the High Frequency Economics consulting firm, in an analysis of the employment numbers.
With payrolls deteriorating in both the manufacturing and service sectors, "there is nowhere to hide," he said.
A separate study by the Institute for Supply Management showed that economic activity in the service sector fell to the lowest level since its index for the sector was first reported more than a decade ago. . . .
The economic decline took a turn for the worse after the market shocks of October. In November, the problems only deepened.
Cash-poor Americans, fearful for their jobs and victims of a steep decline in stock prices, pulled back on spending. Businesses laid off workers, cut wages and reduced hours. Real estate developers and owners suffered.
That bleak portrait — effectively a confirmation of the conventional wisdom of the last few weeks — was released on Wednesday afternoon [December 3] by the Federal Reserve in the latest edition of its beige book . . ..
At the root of the problems is a significant slowdown in spending, as Americans retreat from large-scale purchases and try to save money amid the worst downturn in a generation. Retail sales fell in most major cities, according to the beige book, while sales of automobiles “deteriorated,” particularly sales of more expensive cars like sport utility vehicles. . . .
Manufacturing activity slowed last month in all 12 districts included in the beige book. Both residential and commercial real estate companies reported problems. Vacancy rates were higher . . ..
And here is this morning's [December 4] Bloomberg story about a possible prepak bankruptcy:
General Motors Corp. and Chrysler LLC executives are considering accepting a pre-arranged bankruptcy as the last-resort price of getting a multibillion-dollar government bailout, said a person familiar with their internal discussions. . . .
Staff for three members of Congress have asked restructuring experts if a pre-arranged bankruptcy -- negotiated with workers, creditors and lenders -- could be used to reorganize the industry without liquidation, a person familiar with that matter said. . . .
General Motors shares traded in Germany fell 1.4 percent to the equivalent of $4.83 as of 11:03 a.m. The stock has plunged 80 percent this year in New York Stock Exchange composite trading. . . .
GM and Chrysler told Congress Dec. 2 that they need $11 billion in government loans just to survive the year as the auto industry slump deepens. To get the money, the companies agreed to slash payrolls, shed brands and shrink dealerships. Bankruptcy was not part of their plans.
GM, Chrysler and Ford Motor Co. asked for a $34 billion bailout package, about a third larger than the $25 billion . . ..
The Democrats’ goal of preserving a U.S. auto industry is not doable without a bankruptcy, said Lynn LoPucki, who teaches bankruptcy law at Harvard University and the University of California at Los Angeles.
Workout Requirement
“A workout requires everybody’s agreement,” he said. “. . . Bankruptcy is the only thing that can work because GM and the government need the ability to force people to go along with the plan. Paying everyone in full is prohibitively expensive.”
About 77 percent of billion-dollar companies survive bankruptcy, according to LoPucki’s database, while the others sell their business. . . .
The government could guarantee the warranties given to consumers on cars bought from a bankrupt automaker, said Mark Bane, a bankruptcy lawyer with Ropes & Gray in New York. Government money could also “ensure that parts suppliers will be paid,” he said.
Less Money
Less government money would be needed in a prepackaged bankruptcy, which might last only two months, compared with two years or more for a regular bankruptcy, according to Bane. In a prepack restructuring, an automaker would go into court after reaching agreement with lenders, workers and suppliers on what each would give up and on the business plan to be followed.
Government aid might be needed only for the period when the company was gaining consent from its constituencies -- which might take as long as six to 12 months, Bane said. . . .
Any assistance must be “based on realistic assessments of what the auto market is going to be and a realistic plan for how we’re going to make these companies viable over the long term,” [President-elect] Obama said yesterday [December 3]. . . .
