Month: December 2008

We’re having a second Great Depression. Why not a second Civil War?

Consider the typical Southerner, working at a backbreaking job for $10 per hour. If business slows down or his company goes out of business, he is immediately laid off. What does he read in the newspaper? Wall Street executives have taken most of the $350 billion that they got from the Federales and paid it to themselves as bonuses. Why are they getting bonuses? For a job well done in the past? These guys did their level best to turn the U.S. into Argentina circa 2001. As an incentive for them to stay in their posts? Where else could they work? Who would hire them? You don’t hear about banks in China desperate to bring in a staff of experts from Citigroup, Merrill, or Bear Stearns. You don’t hear about successful companies like GE or Google saying “What we need to do is bring in some of those great minds set free after they bankrupt Lehman Brothers.”

He turns to the next page of the newspaper. The Federal government has been indifferent to all of his friends in the Carolinas who’ve lost their jobs in various mid-sized manufacturing concerns. The potential of GM and Chrysler employees losing some pay, however, attracts the full-time efforts of the U.S. Congress for weeks. Now he reads that George W. is sending a $17.4 billion Christmas present to Detroit. Our Southerner works hard for a $10/hour paycheck with minimal benefits and he is now paying extra taxes to support guys in Michigan who get millions every year to work a desk job (incompetently) or UAW members getting over $40 per hour in cash, health care, and pension benefits.

Incompetence in the South leads to the management getting fired, the workers being laid off, and everyone in the community suffering lower wages going forward. Incompetence in the Northeast and Midwest leads to the rest of the U.S. being taxed so that employees continue to get paid the same, oftentimes regardless of whether or not they show up to work. Now would seem to be a great time for the South to secede.

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Waiting until the last minute to shop for Christmas, hoping that deflation will make gifts more affordable? Short of cash after the market crash?

Idea #1 (if unemployed): Visit Project Gutenberg, download a plain text copy of your favorite book, and email it to a friend as an attachment with “Merry Christmas” in the subject. Authors of today are but literary midgets compared to the giants of American Literature, such as Edith Wharton (start with House of Mirth), so why pay $20 for a book whose merits will be scant next to the works of Henry James, Thoreau, Hawthorne, and others who inhabited this continent before we decided that public school teachers should be certified and unionized. For a foreign author whose work is timely once more, try Knut Hamsun’s Hunger.

Idea #2 (if employed): Use your company’s laser printer to print out a copy of your favorite book from Project Gutenberg. Collect some pine needles from the nearest tree and tape them to a cover sheet. Take bus over to friend’s house and give to friend.

Anyone else have a good idea for a last-minute Christmas gift that won’t cost big bucks?

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One of the proposals we hear for stimulating our economy is extending unemployment benefits. If a worker has been out of a job for 26 weeks, the benefits typically stop. Extending payments for a full calendar year will supposedly improve the economy.

Why does it make the U.S. more competitive and vibrant if we tax working Americans to give money to non-working Americans? In a cyclical recession, an unemployed guy in Michigan could reasonably wait around for a year until things picked up and he could find a job again. Those extra 26 weeks of unemployment benefits enabled the guy to stay in the same house and be available when his skills were needed, oftentimes by his former employer.

Whatever we’re in right now, however, doesn’t seem to be part of a business cycle. We handed over most of society’s wealth to our least productive citizens (realtors, mortgage brokers, Wall Street mediocrities). We raised taxes until business moved offshore. We dumbed down our schools until companies could find better educated workers in countries where people live very comfortably on $5,000 per year. Do we seriously believe that Michigan is going to bounce back within our lifetimes, much less within the proposed 52 weeks of extended unemployment payments?

An unemployed worker in Michigan needs to move somewhere with a lot of new jobs being created and not too many highly skilled unemployed people competing for those jobs (state-by-state statistics). Certainly he is going to have to move to another state. Possibly he may need to move to another country. Handing out 52 weeks of cash instead of 26 weeks seems likely only to delay the inevitable. The guy will be a bit better rested when he finally does move, but he will also be out of practice from not having worked for a year.

Could it be that extending unemployment benefits is a sensible practice that worked in cyclical recessions, but we’re now trying to apply it after a major structural shift in the U.S. economy?

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I was listening to a BBC talk show this evening and they broadcast something that I hadn’t heard from domestic news sources: the voice of an actual autoworker. He said “I worked for Chrysler for 10 years and I never got laid off until now.” He described how his union contract required Chrysler to pay him for 36 hours per week indefinitely even if he never went back to work. “Now I’m worried that they’ll run out of cash and stop paying me,” he plaintively concluded.

One wonders why we don’t hear from too many actual autoworkers. We hear from the union, various politicians, the managers of the Detroit automakers, but almost never the workers whose jobs are supposedly the focus of any bailout.

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If we believe what we read in the newspaper, for the past few weeks we have had all of our top legislators and executive officials occupied with the challenge of saving GM and Chrysler from the indignity of a Chapter 11 reorganization.

Stepping back from this waste of time and effort there are a few question worth asking…

Question 1: Given that our government can’t run its own core functions efficiently, why did we think that a government-appointed “Car Czar” was going to be able to solve GM and Chrysler’s problems? The federal government is going to spend $400 million for each new presidential helicopter that it buys. Under a cost-plus contract, the $30 million Augusta/Westland EH101 morphed into the Lockheed Martin VH-71, a machine with nearly identical specifications and appearance that costs more than a Boeing 747. Are we paying for speedy delivery? The first EH101 flew in 1987. Lockheed Martin is currently scheduled to start delivering the VH-71 presidential helicopter in 2017. The folks who worked who worked on that project are supposed to show GM how to compete with Honda?

Question 2: Could our politicians be working on things that are likely to yield better results for the overall economy? While we dither about GM and Chrysler, our schools continue to be the most expensive in the world while producing mediocre results. Per-capita, our goverment spends nearly as much on health care as any other country in the world… while covering less than half of the population.

Question 3: Does preserving GM and Chrysler in their present forms address our most serious transportation issues? As discussed in my economic recovery plan, unclogging America’s streets and highways with smarter networks and congestion pricing would be a lot more valuable to business than getting everyone out of a Toyota and into a Dodge. To encourage development and sale of electric cars we will need to install power outlets in a lot of Burger King parking lots (more). Who is thinking about that?

As of 2:30 pm, Wall Street has greeted the probable Chapter 11 filings of GM and Chrysler with a yawn. The S&P 500 is down less than one percent. It seems that GM and Chrysler reorganizing do not constitute a national emergency.

Could we possibly generate the same kind of excitement that we’ve seen around GM and Chrysler about bringing our public schools up to internationally competitive standards? Children graduating today are educated to only a fraction of their potential, which would have been a serious waste 100 years ago. Now that our least able citizens are in direct competition with the most able workers in Mexico, China, and India, the situation would seem to merit some urgency.

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Now that the Republican Scrooges in Congress have denied GM and Chrysler a $14 billion Christmas present, perhaps it is time to step back and ask what lessons we can learn from this mess.

Lesson 1: When you’re running out of cash, don’t advertise the fact. Now that GM and Chrysler have said that they can only last another month or two, who is going to buy their cars? Surely those cars will be cheaper after they file Chapter 11. What about suppliers? Will they continue to extend credit? Employees? Wouldn’t any who had sufficient skills to find a job on the open market already be packing up their desks?

Lesson 2: When traveling to Washington to ask for taxpayer funds, share one Gulfstream or learn how to use Travelocity or Expedia to book an airline seat on one of the many daily non-stop flights from Detroit to Washington, D.C. It may be painful to buckle a seatbelt that hasn’t been gold-plated, but we all have to make adjustments in these tough times. (Save the bizjets for when you’re visiting a supplier or factory in an obscure town that lacks commercial airline service.)

In the history of American business, it is tough to find an example of any company that managed its own demise this badly. Most management teams keep up a cheerful patter right until the morning that the Chapter 11 filing lands in the bankruptcy court’s lap. Customers and suppliers are the last to know and employees get hints at best.

Realistically, how can taxpayers help companies that can’t even go bankrupt competently?

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A new perspective on the Canon versus Nikon debate: Adolf Hitler discusses the Nikon D3x.

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I want to mail friends a New Year’s card that says “Let’s hope that 2009 can’t be any worse than 2008”. It would be good to illustrate this with some cheerful photos, e.g., Wall Street tycoons hauling their billions in bailout cash up to Greenwich, CT, our elected officials getting handcuffed, etc. Given that I forgot to move all of my money into T-bills a year ago, price is a concern.

What’s a good service to use for high-quality photo printing into greeting cards? Here are some constraints…

• does not require me to prepare camera-ready PDF files (i.e., I want to give them JPEGs to put into a template, not pretend to be a competent user of Quark or Adobe tools) or color separations
• reasonably cheap for quantity 200 (don’t have that many friends)
• will send out a proof and then the total print run within a couple of weeks

Thanks in advance!

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Listening to music makes people happy. Listening to news makes people unhappy. Listening to fundraising drives makes people irritated and unhappy.

Let’s compare government-funded radio here in the U.S. and in Canada.

Public radio stations all over the U.S. have been cutting down on music and substituting news programs. In the rare event that they still have a music or entertainment program, it will be interrupted every 10 minutes while they ask for money and tell you how great public radio is. Their digital terrestrial stream (“HD radio”) will be 96 kbps and their Internet stream will be about the same. Americans who are fed up with this and just want to hear music subscribe to Sirius or XM and pay $300+ per year to hear radio in their car and their house at… 64 kbps! That’s the same as an ISDN telephone line!

Canada, by contrast, has public radio stations that live within their means. Whatever they get from the government is what they use for their budget. They don’t constantly ask listeners for money. The Internet streams are 192 kbps, 1.5x the bitrate of the iTunes that Apple sells. What do they play on these stations? Music, interrupted very occasionally for station identification. Check it out at http://www.cbc.ca/radio2/ (CBC Jazz has found much more favor in our household than Sirius jazz stations). These streams work great throughout a house on a Sonos system.

As long as our government is spending another trillion dollars or two, would it be too much to ask for a few all-music free non-commercial radio stations? Like the passengers on the Titanic, shouldn’t we have dance music right up until the ship sinks?

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Now that gasoline is below $2 per gallon, we allowed ourselves a bit of extra driving through Massachusetts during the weekend. We rolled over brand-new bridges, repaved roads, past sparkling new $50 million municipal libraries, gaping at new public school buildings (e.g., Newton’s more than $200 million high school). We listened to radio programs debating the likely effects of various government stimulus programs, including increased public works spending.

If public works spending were effective, shouldn’t Massachusetts already be doing great in jobs and growth? We have the highest per-capita public debt of any state in the union, presumably as a consequence of having spent a lot on infrastructure. Yet this Globe article says that we’re not going to be strangers to unemployment, which means that we’re doing worse than most states in job creation (because our population growth is very low compared to the national average (source)).

Throughout the U.S., local, state, and federal governments have not been slouching for the last 10 years in public works spending. In fact, many local and state governments went on spending sprees as their income and property tax revenues boomed. Yet 12.5 percent of Americans find themselves unemployed or “discouraged” from hunting for a job.

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