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This is scary. Allan Hubbard, President Bush's top economic adviser, professes not to know the size of the national debt.
From yesterday's White House press briefing.
Q Al, can I ask you one? I can't remember the last time the President spoke about the national debt, which is now over $8 trillion. Is that something you guys worry about?DIRECTOR HUBBARD: Well, I don't know where your $8 trillion comes from, but we --
Q The public website.
DIRECTOR HUBBARD: Well, I guess it really depends on what you're including, but let me -- again, the President is most concerned about the economy and the budget. And a key component of that, as I have spoken earlier, is the budget deficit. And, you know, that's what contributes to the overall budget debt, the country's debt, and that's why it's so important to reduce the budget deficit and, hopefully, ultimately, eliminate the budget deficit.
Q Does the magnitude of the national debt disturb you?
DIRECTOR HUBBARD: Actually, again, I don't know what numbers you're using, but the current budget debt is not a problem, but we do not want it to grow as a percentage of the GDP. That's the way you want to look at it, is the debt as a percentage of GDP. And our budget debt is lower than many other developed countries. The President is committed to keeping it low; that's why he wants to cut the budget deficit in half by 2009. . . . .
Q Check the Bureau of Public Debt website, you'll see the number there.
DIRECTOR HUBBARD: Okay, thank you.
Is the ignorance here calculating -- i.e. Hubbard really knows what the national debt is but acts like he doesn't because it's embarrassing to talk about? Or is it genuine -- i.e. Hubbard really doesn't have any clue what the national debt is? (I vote for the latter.)
In case, he's still looking, the link is right here. And the debt is actually now more than $8.1 trillion.
Given that the debt limit is $8.184 trillion, we're only a few weeks from crashing throught the limit yet again. Merry Christmas!
Posted by dan at 01:08 PM
The French anti-competition police are busy. Adam Jones reports in the Financial Times:
Pierre Bardon, managing director of SFR, France's number two mobile telephone operator, insisted that there was a perfectly innocent explanation for the note, handwritten in a mixture of green and blue ink."Despite its appearance, this document does not constitute in any way an exchange with our two competitors to share out the market," he told investigators.
Alas, for Mr Bardon, France's Competition Council did not buy his version of events.
Yesterday, SFR, Orange France, the French market leader in mobiles, and Bouygues Télécom, the number three, were fined a total of €534m ($672m) for colluding to the detriment of consumers.
Yesterday, SFR, Orange France, the French market leader in mobiles, and Bouygues Télécom, the number three, were fined a total of €534m ($672m) for colluding to the detriment of consumers.
The SFR note, dated March 28 2001 and seizedin a raid in the summer of 2003, was one of several key pieces of evidence - albeit fragmentary ones - produced by the Competition Council to justify the fine,the biggest in its history.
The note, part of which was crossed out, read: "Michel Bon [former chairman and chief executive of France Télécom, parent of Orange] via D. Quillot [chief executive of Orange France] is OK to renew in 2001 the agreement on market share 2000 in gross sales, although they didn't respect it in the second half of 2000. Philippe Montagner [chief executive of Bouygues Télécom] after having asked for 23 per cent of gross sales is accepting 22 per cent."
When they raided Orange France, investigators found intriguing internal documents there, too, including the references to a "market share Yalta".
Market share Yalta. Who played Stalin?
Posted by dan at 04:31 PM
From my mouth to the ears of media moguls. Cablevision founder Charles Dolan comes out in favor of a la carte cable pricing. Ken Belson has the goods in the New York Times.
Posted by dan at 04:29 PM
Is the Associated Press misconstruing the administration's projects on job growth for next year? Or is the White House playing games with jobs numbers again? The following ran in the print edition of today's New York Times:
"WASHINGTON, Dec. 1 (AP) -- The Bush administration on Thursday issued a slightly more optimisitc estimate of economic growth this year. . . ."On the jobs front, the administration predicted employment would rise by 2.1 mlion this yaer to an annual average of 133.6 million, the same as its previous forecast.
The administration predicted 1.9 mililon new jobs would be generated next year, raising the annual average employment to 135.5 million."
We've been through this before. For annual average employment to rise by 1.9 million, the economy has to generate far more than 1.9 million jobs. If the economy generated 1.9 million jobs over the course of a year in a consistent way, the average employment for the year would only grow by 950,000. In order for annual average employment to grow by 1.9 million, the economy would have to create something like 3.8 million jobs over the course of the year, or nearly 317,000 jobs per month.
Does the White House think jobs will rise by 317,000 per month next year? The Council of Economic Advisers has the full forecast on its website, but when I click on it, I get an error message. Hmmm.
The CEA press release notes, "Payroll employment growth during 2006 is projected to increase to 176,000 per month, essentially unchanged from the Administration’s previous forecast." Job growth at a rate of 176,000 per month would result in the creation of 2.112 million new jobs over the course of the year, and annual average job growth of 1.056 million jobs.
There's a table at the bottom of the press release that does indeed show the administration believes the payroll jobs figure will rise from 133.6 million in 2005 to 135.5 million in 2006. But it doesn't stipulate whether that figure is a year-end level, or an average for the year.
My guess, based on looking at the BLS data, is that the figures in that table are annual averages. After all, as today's employment release shows, payroll jobs are already at 134.289 million..
If that's the case, then both the AP and the person who crafted the CEA press release got something seriously wrong.
Posted by dan at 09:03 AM
We had been skeptical that the calls by Private Capital Management for Knight-Ridder to auction itself off would draw many bidders.
Dennis Berman, Henny Sender and Joseph Hallinan report in today's Wall Street Journal that one group of private equity firms is sniffing around:
A trio of private-equity firms has formed an alliance to examine purchasing newspaper publisher Knight Ridder Inc., according to people familiar with the matter.The alliance -- consisting of the Blackstone Group, Providence Equity Partners Inc. and Kohlberg Kravis Roberts & Co. -- is in early stages of preparation, these people say. But the buyout firms remain wary that the $4 billion market capitalization is too high for the publisher, which owns the Miami Herald, the Philadelphia Inquirer and 30 other daily newspapers.
Nonetheless, the formation of the consortium represents a small but telling sign of interest for an auction that has been expected to be a difficult one for the San Jose, Calif., company. Concerns about the health of both display and classified advertising -- increasingly encroached upon by Internet-driven media -- have led many to believe the company will be hard-pressed to find a buyer.
Some potential financial buyers say that with a new management team, there could be significant upside and improved revenue for the chain. In addition, the economics for a financial buyer differ from those of an industry buyer. That is because the private-equity firms are willing to put far more debt on their prey than industry buyers, concerned with maintaining a high rating, are willing to tolerate. While debt capital markets recently have begun to impose stricter terms and higher pricing on acquisition finance, both the banks and the bond markets remain relatively robust. . .
Knight Ridder will get an initial taste of the interest Dec. 9, when first-round bids are due, according to people familiar with the matter."
Posted by dan at 09:32 AM
Philip Coggan of the Financial Times reports on a potential trading strategy for the 2006 World Cup:
It is not only football fans that feel sick as parrots when their team loses. Stock markets suffer too.A new study* finds a link between a national team's results and the subsequent day's performance of the country's stock market.
The study analysed 1,162 football matches played across 39 nations, focusing on the World Cup or on Continental competitions such as the European Championship. Elimination is, on average, associated with a stock market performance that is 38 basis points (slightly more than a third of a percentage point) worse than normal.
The effect seems to be strongest in small stocks, where local investor sentiment is most likely to be dominant. It seems to be un-related to the potential economic effects - such as loss of merchandising revenue - that defeat might have.
The study seems to chime with other surveys which found that increases in heart attacks, murders, suicides and riots are associated with sporting defeat. The mood of the population is adversely affected by a loss, particularly for sports in which a large proportion of the population takes an interest.
However, a similar positive effect was not found when teams won. That may be because sports fans have unrealistic expectations of their team's chances of success. For example, 86 per cent of fans thought England would beat Brazil in the 2002 World Cup quarter-final, even though Brazil were the world's top-ranked team and bookmakers assigned only a 42 per cent probability to an England victory.
Interesting. The most shocking finding to me is that 86 percent of British fans thought England would beat Brazil.
The study, by Alex Edmans, Diego Garcia and Oyvind Norli, can be seen here.
Posted by dan at 09:26 AM
Holman W. Jenkins, Jr., of the Wall Street Journal editorial page is miffed that an innovative new technology-driven product is proving successful in the marketplace.
In an op-ed today, he tries to debunk the success of the Toyota Prius by noting that, like other vehicles, it doesn't always get the amount of milage that the manufacturer advertises; that it runs in part on gas; that buyers won't recoup the higher costs of the Prius in saved gasoline; and so on. All of which is obvious.
People don't buy the Prius because it will save them money on gas. They buy it because it enables them to drive while using less gas. What's more, people think the car is cool because it runs in part on electricity, which means it doesn't make noise, waste gas, or emit noxious fumes while it is idling. (Would that the same could be said of Jenkins's colleagues.) As I've noted before, the Prius is less likely to eat up drivers' time and money by requiring trips to the repair shop. The economic, cultural, and psychological case for the Prius and other hybrids revolves around much more than gas milage and simplistic calculations about the cost of gas.
On the other hand, it's not surprising that Jenkins has a tough time wrapping his mind about market success. By now, he must be something of a connoisseur of market failure. In recent years, the WSJ editorial page has seen its programming fail to catch on in the competitive marketplace of television--twice. The print version of the Wall Street Journal is failing to turn a profit consistently in the competitive marketplace of newspapers because it can't attract enough advertising. And I'm guessing the op-ed page is a net drain on the paper's cash. (Jenkins' column today runs above a cheesy ad for $160 fake diamonds such as one might expect to see in the New York Post.) Finally, Dow Jones management, without whose sponsorhip the editorial page wouldn't exist in its current form, has for years failed in the ultimate marketplace: the stock market.
Posted by dan at 12:02 PM
The Wall Street Journal's Jesse Eisinger sounds the alarm about subprime debt. Some choice morsels:
Bill Ryan, an analyst for the independent financial research firm Portales Partners, has been on the lookout. Since the home has replaced the credit card as the consumer's ATM of choice in recent years, the proper place to look for early warnings signs is from delinquent mortgages, he reasons. And the likely area for those would be the subprime sector, which caters to high-risk folks.Mr. Ryan looked at data on delinquencies for adjustable-rate mortgages for subprime borrowers, shown in the nearby chart.
The 2005 data through September reveal that these mortgages are faring worse than in comparable periods in each of the three previous years. This year, 6.23% of the loans are delinquent, on average, in their first nine months, a rate not surpassed until the 20th month for 2004 mortgages. By September 2004, that year's mortgages had a delinquency rate of only 3.72%. . .
Keep in mind that most of these mortgages were two-year hybrids, which have a fixed rate for two years and then float for the remaining 28. If rates rise during the first two years of the mortgage, at the end of that period the monthly payments would shoot up and lead to payment shock. The only out is to refinance, but that's impossible if the home's value hasn't risen. This year, rates have risen and, predictably, home prices mostly have stalled or gone down.
To see the effects of this, look at the line representing the 2003 mortgages. At around 24 months into these mortgages, just when the popular two-year ARMs were resetting to higher rates, delinquencies shot up. At 24 months, the percentage of folks 30 days late on their payments was 10.2%. Six months later, the delinquencies had spiked to 16.6%.
What makes this so troubling is that the dollar amount of two-year ARM mortgages was much smaller in 2003 than in 2004 or this year. Mark Agah, another analyst at Portales, estimates that there were about $220 billion in two-year ARMs in 2003. That soared to about $400 billion last year and should be around $440 billion this year.
That means at the two-year point for the 2004 mortgages, we are likely going to see a lot more mortgage problems."
The chart is even more alarming than Eisinger makes it sound. More than 20 percent of the adjustable-rate suprime loans made in both 2002 and 2003 are delinquent? Who is holding the bag on all this?
Posted by dan at 11:57 AM
John Authers reports in the Financial Times that individual investors have an inflated sense of their own asset-management prowess.
US retail investors have regained their optimism in the stock market and are newly confident in the securities industry, according to a survey by Sanford Bernstein. However, they also appear to be deluded about the success of their own investments, with the average investor reporting that their US equity portfolio has grown 9.6 per cent over the past 12 months..This is a statistical impossibility, as the S&P 500 benchmark index has gained only 5.5 per cent over that time, and shows that investors continue to be uninformed.
The findings, based on a survey of 1,535 individual investors, amplify recent data showing that retail investors are regaining some of their confidence, though they are not necessarily devoting all their equity investments to the US
Posted by dan at 11:54 AM
Just days after we expressed skepticism, on Slate, as to whether a late Hanukkah will make a difference in Christmas shopping, Rachel Dodes of the Wall Street Journal argues that it will.
"Ken Giddon is expecting an unusually strong holiday season this year, but not because of falling gasoline prices, colder weather or the extra shopping weekend before Christmas. It's the late Hanukkah.
"When Hanukkah is early, it takes the momentum out of the season," says Mr. Giddon, the owner of Rothman's, a high-end menswear retailer with stores in Manhattan and Scarsdale, N.Y. This year, with Hanukkah starting on Sunday, Dec. 25, Mr. Giddon is looking for a 10% to 15% increase in holiday sales over last year.
Christmas and the first night of Hanukkah, the eight-day Jewish festival of lights, coincide perfectly this year, for the first time since 1959. The start date of Hanukkah, determined by the lunar calendar, falls near Christmas about once every three years. But it hasn't come this late in the season since 1997, when the first night of Hanukkah was Dec. 23. In 1986, the first night of Hanukkah was Dec. 26, and in 1978, it was Christmas Eve.
The upshot for retailers is that this year's holiday shopping season, which got off to a frenzied start on the day after Thanksgiving, will probably end in the same manner."
But where's the evidence? Dodes notes that Jews are a tiny minority of the consuming public.
"How much of holiday sales are attributable to Hanukkah? Nobody really knows. Jews make up less than 2% of the U.S. population, but their incomes, and as a result their spending power, tend to be well above average -- suggesting a greater-than-2% slice of the annual holiday shopping bonanza, expected this year to total about $439.5 billion. But there are other factors to consider, including that many Jews eschew lavish gift-giving in their Hanukkah celebrations.
In the rest of the article, she cites stores and malls in Jewish neighborhoods or regions with heavy Jewish populations preparing for a deluge of December Hanukkah shoppers. Not exactly surprising. And in general, there's too little acknowledgement that the markets she describes -- like the Upper West Side of Manhattan -- are few and far between in the U.S.
Posted by dan at 11:45 AM
The Financial Times observer column wonders why the nomination of C. Boyden Gray to be Ambassador to tthe European Union is being held up.
With US secretary of state Condoleezza Rice due in Brussels again on December 8, observers are wondering why there is no US ambassador to meet her. C. Boyden Gray, the Washington power broker nominated this summer by President George W. Bush to serve as US ambassador to the European Union, has been in limbo for months while Democratic senators sat on his nomination.One senator, Dick Durbin of Illinois, recently lifted his "hold" on Gray's nomination - apparently after Gray wrote a deeply apologetic letter to him for an incident dating back to 2003.
But as many as 14 other Democratic senators are still holding Gray's nomination. "I have no idea where things stand," added a spokesman for the Republican members of the foreign relations committee.
Gray might have to wait until the start of next year to learn if he should pack his bags. The Senate is scheduled to be in session for just a few days during the week beginning December 12, mostly to complete its work on annual spending bills.
Observer's man in the state department said he thought the White House would persevere with the appointment, though he did recall William Weld, who never made it to Mexico because of Jesse Helms's block.
The shop is being minded capably by Michael McKinley, a career diplomat who arrived as deputy chief of mission last year.
Why is Gray so toxic to some Democrats? As a former White House lawyer for the first Bush presidency, he is thought to be more "realist" than neocon. But he has been very active in helping to push conservative judicial nominees through Congress - a hot topic in a year when two vacancies opened on the Supreme Court.
The FT is being a bit naive here. Gray's toxicity has nothing to do with foreign policy, and comparatively little to do with the face that he was "very active" in lobbying for judicial nominees. No, it has everything to do with that "incident" for which he apologized to Sen. Dick Durbin about.
What was that incident?
As Amy Sullivan notes, Gray was founder and chairman of the Committee for Justice, which distinguished itself by accusing Democratic Catholic Senators like Durbin, Pat Leahy, and John Kerry, of vicious anti-Catholic bigotry. It's no wonder his nomination remains in purgatory.
Posted by dan at 10:14 AM
More proof of honor among thieves, French-style. Adam Jones and Matthe Garrahan report in the Financial Times:
Six of Paris's most opulent hotels, where rooms cost on average more than €700 (£479) a night and suites can cost more than €6,000, have been fined by the French competition watchdog for collusion.The Bristol, the Crillon, the George V, the Meurice, the Plaza Athénée and the Ritz, all renowned for their historic buildings, squadrons of attentive staff and Michelin-starred restaurants, were found to have regularly exchanged confidential commercial information.
The six, known as palaces for their grandeur, were told to pay between €55,000 and €248,000 each by the Competition Council.
The heaviest fine was levied on the Crillon, which has hosted everyone from Madonna to Emperor Hirohito in nearly a century of use as a hotel.
Owned by Starwood Capital, the US property and hotel investment vehicle, the Crillon declined to comment on whether it would appeal, saying it had not yet received official notification of the fine.
The Meurice, whose past guests include US president Franklin Delano Roosevelt, was fined €55,000, while the Plaza Athénée, the haunt of Vanderbilts and Rockefellers, was fined €106,000. Both hotels are part of the Dorchester Group, owned by the Sultan of Brunei.
The Ritz, owned by Mohamed Fayed, the proprietor of Harrods, was fined €104,000. The George V, operated by the Four Seasons group, was fined €115,000. The Bristol was told to pay €81,000.
After a four-year investigation, the competition watchdog saidit found regular exchanges of information between the six palaces through meetings and messages, on a weekly and monthly basis.
Now the French competition watchdog (fifi?) should investigate why mid-priced hotels in Paris conspire to maintain subpar bathrooms.
Posted by dan at 08:40 AM
Jeremy Grant writes in the Financial Times that Anheuser-Busch is struggling--as a company and as a stock--because its management is too parochial.
Anheuser has delivered two quarters of disappointing earnings as it has used steep discounting to defend its market share against second-ranked Miller Brewing and third-placed Molson Coors, the brewer formed in February from Canada's Molson and Colorado-based Adolph Coors.For years, Anheuser commanded half the US beer market with its Budweiser and Michelob brands. But a resurgent Miller, backed with fresh money and a new strategy under South African Breweries, its new parent, started gaining on Anheuser last year. . .
Yet even if Anheuser manages to regain pricing power in the US early next year, as it predicts it will, there are concerns about Anheuser's reliance on the US for more than 80 per cent of itsearnings.
While it is still the most profitable single market in the world, it accounts for only 16 per cent for SABMiller's earnings, which are derived from operations in 40 countries.
Outside the US, Anheuser owns half of Grupo Modelo, the Mexican brewer that sells Corona, the number one imported beer in the US.
In China, the fastest-growing beer market, it has an almost 10 per cent stake in Tsing Tao and owns breweries in Wuhan and Harbin. Last week Anheuser said production at its Harbin brewery had been unaffected by the Chinese city's recent toxic spill as it used its own well rather than the city's water supply.
Anheuser appears unperturbed by this relatively small non-US presence. Indeed, a flag-waving section on its website touts how 95 per cent of its stock is owned by American investors, while foreign ownership of Miller Lite means that "if you buy an SABMiller product, 68 per cent of the profits go outside of the US".
Dave Kolpak, managing director at Victory Capital Management, which owns Anheuser shares, says the idea that Anheuser is over-exposed to the US is "just false".
He points out that Anheuser has been reluctant to pay the prices that have been asked for many foreign brewing assets. "I believe they could be the dominant player in many countries if they wanted to, and their shareholders would be a lot less wealthy than they are now."
However, since 2002, when SAB bought Miller Brewing, the brewer's shares have risen by 129 per cent, on a dollar-adjusted basis.
Those of Inbev, theBelgian brewer, have risen by 43 per cent. Meanwhile, shares in Anheuser-Busch have fallen - by almost 13 per cent.
Posted by dan at 08:35 AM
Tom Braithwaite reports in the Financial Times on how emission caps and the trading of credits can be a lifeline for struggling industrial companies.
Rhodia yesterday said the United Nations had approved the company's plan to reduce greenhouse gas emissions, paving the way for the loss-making French chemicals producer to generate badly needed cash from selling UN-issued carbon credits to other polluters. The carbon credits, issued under the Kyoto protocol, are likely to be an important revenue stream for Rhodia, which plans to put 11m-13m tonnes on the market each year from 2007.Shares in Rhodia jumped 20 per cent at one point yesterday before closing up 11 per cent at €1.45.
The UN decision means Rhodia will be rewarded for cutting pollution at an acid plant in Onsan, South Korea. Approval for a similar scheme in Paulinia, Brazil, is expected by the end of the year.
Morgan Stanley said credits issued to Rhodia couldbe worth a total of€468m-€2.3bn ($552m-$2.7bn) between 2007 and 2012. Their exact value is difficult to judge because the nascent global market for emissions certificates is as yet volatile and illiquid.
"They will be reported as a revenue in the P&L [profit and loss account] with close to zero costs attached," said Morgan Stanley. There should also be minimal tax on the revenue if it is booked in France where it can be set against losses, the bank added.
Rhodia said it was on target to cut overall greenhouse gas emissions by 80 per cent for the period of 1990-2010. The improvements to the South Korean factory should be completed by the end of 2006, the company said.
Last week Rhodia launched a second rights issue in two years, valued at €604m, in an attempt to shore up its debt-laden balance sheet.
One analyst, who did not want to be named, said: "You could have the ludicrous situation where Rhodia makes more money from trading carbon than making chemicals."
Posted by dan at 08:26 AM
The cost of Christmas has risen 6.1 percent in the past year, according to PNC's annual "Twelve Days of Christmas" Index.
Posted by dan at 08:24 AM
Analysts have puzzled and wondered about what corporate America plans to do with the record amount of cash sitting on its balance sheet. Dividends? Stock buybacks? New investments? There's evidence mounting for all of the above. But some cash is clearly going into an important asset class: private jets.
Christopher Chipello and Andy Pasztor report in the Wall Street Journal:
Executives pining for that new corporate jet will have to be patient.World-wide demand for new business jets is climbing toward anticipated new heights, with aircraft manufacturers delivering 510 jets during the first nine months of the year, up 30% from the year-earlier period. . .
That, combined with inherent assembly-line limits and supplier constraints, mean many of their customers have to wait months -- or even years -- for popular models to be delivered. The fat backlogs help keep sticker prices firm and profit margins healthy for manufacturers and their subcontractors, while also driving up prices in the used-plane market. Yet manufacturers also run the risk of alienating blue-chip customers with extended waits for delivery.
Bombardier usually aims to have about a year's worth of orders on hand for its more-expensive models. But currently, the backlog for Bombardier's top-of-the-line Global Express, an intercontinental corporate-jet priced at around $45.5 million, has reached 34 months. Even backlogs for the Canadian company's lightweight Learjet models are close to a year, instead of the six-to-nine month internal target. "The challenge is always to make sure we don't ramp up faster than the market," said Pierre Beaudoin, president of Bombardier's aerospace group.
At General Dynamics' Gulfstream Aerospace unit, the biggest supplier of high-end jets with total 2005 business-aircraft deliveries valued at $2.5 billion through Sept. 30, order backlogs currently average 18 months to two years, said spokesman Robert Baugniet. Gulfstream increased deliveries to 59 jets through September from 51 a year earlier, without adding plant capacity. "We've all in recent memory lived through a dramatic downturn in this industry" and will handle production increases "carefully in the future, to avoid peaks and valleys in employment," Mr. Baugniet added.
Posted by dan at 08:20 AM
Talk about willful ignorance. Can George Will really be this clueless? And doesn't he have an editor? In Sunday's Washington Post, he rhapsodizes about the brilliance of Indiana Gov. Mitch Daniels and his budget-cutting ways.
"Ending bottled water for employees of the Bureau of Motor Vehicles (annual savings, $35,000). Ending notification of drivers that their licenses are expiring; letting them be responsible for noticing (saving $200,000). Buying rather than renting floor mats for BMV offices (saving $267,000 this year). Initiating the sale of 2,096 surplus state vehicles (so far, $1.95 million in revenue from 1,514 sales). Changing the state lottery's newsletter from semimonthly and in color to a monthly and black-and-white (annual savings, $21,670). And so on, and on, agency by agency.Such matters might be dismissed by liberals who think government spending is an index of government "caring," and perhaps by a new sect called "national greatness conservatives" who regard Daniels's kind of parsimony as a small-minded, cheeseparing exercise unworthy of government's great and stately missions. But it seems to be an Indiana approach.
What is it about Indiana? In this annus horribilis for conservatives, one of their few reasons for rejoicing has been the ascent to influence in the U.S. House of Representatives of the Republican Study Committee, more than 100 parsimonious members under the leadership of Mike Pence, a third-term Hoosier from a few miles east of here. The RSC's doctrine, a response to a one-third increase in federal spending during the current president's first four years, might be called Danielsism, which is: There is more to limited government than limiting its spending, but there will be nothing limited about government unless its spending is strenuously limited.
So "Danielsism" means responding to the "one-third increase in federal spending during the current president's first four years"?
People who were awake during the first part of this decade may have a different definition of "Danielsism." People who were awake then might recall that Mitch Daniels was the head of the Office of Management and Budget, through June, 2003. They might also remember that while he was nicknamed "the Blade," he did nothing to cut federal spending, and in fact was a key player in the events that led to the "one-third increase in federal spending during the current president's first four years."
Oh, and one of the first things Daniels did upon taking office was to call for increasing marginal tax rates on the wealthy.
"Danielsism" a sounds an awful lot like Fiorello LaGuardiaism.
Posted by dan at 10:24 AM
Daniel Altman writes in the New York Times that the supply of Bush-hack academic economists is rather small.
"IT'S no secret that hurricanes and wars have swamped the economic agenda that George W. Bush planned for his second term. In the commotion, however, one fact has gone largely unnoticed: much of Washington's expert economic team has disappeared.The chairmanship of the Council of Economic Advisers will soon be vacant, and two spots on the Federal Reserve Board that were recently filled by academic economists already are. There is no assistant secretary of the Treasury for tax policy, and the director's chair at the Congressional Budget Office, currently occupied by Douglas J. Holtz-Eakin, will soon be empty, too.
The White House and Congress need as many as five academic economists of high caliber, and it's not obvious where they will come from. The Republican Party may be facing something of a shallow bench.
"Bush's reputation in at least the academic community is about as low as you can imagine," said William A. Niskanen, who was a member of the council during President Ronald Reagan's first term and is now chairman of the Cato Institute, a libertarian research group. "A lot of people would not be willing to give up a good tenured position for a position in the White House."
Back in 2003, the choice of N. Gregory Mankiw, a Harvard professor, to head the council initially provoked some wonderment from economists. He had condemned supporters of some Reagan-era tax cuts as "charlatans and cranks" in the first edition of his basic economics textbook, and he had suggested replacing part of the income tax with higher taxes on gasoline - a nonstarter in this White House. But it's possible that the administration had few other options.
"It has been true, typically speaking, that Republican administrations have found it harder to find senior, more prominent academic economists for the C.E.A. members and chairman than have Democratic administrations," said Michael L. Mussa, a senior fellow at the Institute for International Economics, a nonpartisan research group in Washington, who was a member of the council during President Reagan's second term. . .
One hint that the labor pool is drying up may be in the ages of some recent appointees. Professor Forbes was only 33 when she joined the council in 2003. Katherine Baicker and Matthew J. Slaughter, two academics confirmed as members this month by the Senate, are 34 and 36, respectively. Before taking up their new posts, both were associate professors, as Ms. Forbes is now - not full professors, like the vast majority of their predecessors."
No truth to the rumor that John Snow has been hanging out in Econ 101 classes at the University of Chicago, trolling for new hires.
Posted by dan at 09:44 AM
The high cost of energy starts to hit home in the New York suburbs. Paul Vitello reports in the New York Times:
STONY BROOK, N.Y. - The main government assistance office in Suffolk County sits just off a busy road in an office park surrounded by a neighborhood of deep lawns and two-car garages. Everyone for miles around uses that road every day. But until recently, hardly anyone from the neighborhood - people whose status in the middle class was thought secured unquestionably by homeownership - ever turned into the office park to seek help inside the county's nondescript building.This year, they have come in from the fear of the cold.
They are retirees, young couples, the temporarily unemployed, the two-income families stretched to the limit of second mortgages and credit cards, a slice of the suburban demographic that social workers call "mortgage rich and pocket poor."
The cost of natural gas heat, already high, has risen 50 percent since last year. Home heating oil prices are up 30 percent. What that means for the larger economy will be divined by economists.
A hint of what it portends for the average person, though, is apparent in early indications from offices like Suffolk's.
"We have more people applying for help, and more of them are in a higher income group than we've seen before," said Mark Wolfe, executive director of the National Energy Assistance Directors Association, a group of 50 state directors in charge of administering a federal home energy assistance program that offers one-time-per-winter cash benefits of $100 to $500.
"The sense is that there is a crisis coming," Mr. Wolfe said. "The question is, can the government get ahead of it?"
My answer: no.
Posted by dan at 09:41 AM
Robin Goldwyn Blumenthal has a scary article/chart in Barron's that describes how many large companies have failed to set aside enough cash to set aside cash for retiree health care benefits.
Money quotes:
"THE PENSION OBLIGATIONS OF GENERAL MOTORS and its bankrupt parts' supplier, Delphi (ticker: DPH), have been grabbing the headlines lately. But GM and other public companies also are shouldering a lesser-known, though more costly, obligation -- retiree health-care costs.GM and its unions recently agreed to shift $15 billion of such costs onto employees, but that represents just a fraction of the company's total retiree health-care liability. Such obligations are only partly reflected on the auto maker's balance sheet, but under a proposed change in accounting rules, soon could appear in their entirety.
For many companies, stockholders' equity is going to get wiped out," says Michael Moran, a vice president in the portfolio-strategy group at Goldman Sachs and the author of the table nearby, which lists the 45 Standard & Poor's 500 companies with the biggest health-care liabilities. Companies with the lowest percentage of assets relative to their obligations could be most at risk.
Were General Motors (GM) to apply the proposed accounting to its balance sheet, it would have to add another $33 billion of retiree health-care obligations, which would more than eliminate shareholders' equity of $28 billion (as of the end of 2004). Ford Motor's (F) plan seems to be even more problematic, with just 17% of retiree health-care costs funded. Delphi, which filed for Chapter 11 bankruptcy protection in October, hasn't reserved any money to fund its retiree health benefits. Other companies with zero funding include Altria (MO); Du Pont (DD); Goodyear (GT); Honeywell (HON) and Xerox (XRX)."
And what's the deal with ExxonMobil? The company is a cash-machine on steriods, and just reported the best quarter ever by an American company. And yet according to the chart accompanying the article, it has only funded 8.2 percent of its retiree health-care liabilities. Again, further evidence that big U.S. companies are simply choosing not to meet the obligations they freely made to employees.
Posted by dan at 09:35 AM
Andrew Parker of the Financial Times notes a good idea from the SEC:
The Securities and Exchange Commission is expected to on Tuesday propose that public companies should be able to choose to provide shareholders with proxy statements – which form the basis for voting at annual meetings – via their websites.Currently, companies must mail the bulky proxy statements and annual reports to shareholders, although investors can agree to receive them electronically.
Most institutional shareholders receive their documents electronically but US companies spend an estimated $1bn a year on printing and mailing proxy statements and annual reports. Alan Beller, director of the SEC corporation finance division, told the Financial Times: “This proposal, if adopted, would potentially save American investors, and the companies they own, hundreds of millions of dollars.”
Posted by dan at 09:27 AM
Here in the U.S., we're seemingly incapable of discussing, honestly, just how reliant our economy is on immigrant labor -- legal or illegal. It's largely unsaid, but one of the reasons we don't lock down our border with Mexico is because American industry -- and American consumers -- needs the continually replenishing supply of cheap labor. And the government knows it. There are a large number of jobs that (1) American citizens simply won't do, or (2) American companies and consumers aren't willing to pay the wages that would lure American citizens to do. And we're not just talking about local landscaping firms and bodegas. We're talking about publicly-held Fortune 500 companies.
Miraim Jordan writes in the Wall Street Journal:
"At a visit today to one of the busiest crossing points for illegal immigrants entering the U.S. from Mexico, President Bush is expected to advocate a new emphasis on border security. But as he stakes out a tougher stance, some industries that rely on low-skilled foreign workers are expressing dismay that his immigration policy is veering away from a comprehensive overhaul they regard as vital to ensuring a stable labor force. . . .Mr. Bush's apparent shift has troubled officials in industries that say worker shortages have recently become worse for a variety of reasons. Some companies find themselves having to let go of workers when, months or even years after hiring an individual, they learn that the person is illegally in the country. The U.S. has stepped up both deportation proceedings and border control, making it harder for new workers to enter the country.
Consequently, worker shortages have developed in industries that have had trouble getting U.S. citizens to take jobs. In agriculture, for example, grape pickers were in short supply for the recent harvest, and farmers lost crops. The meatpacking and meat-processing industries are facing similar problems, as are landscaping, nursing homes, construction and other industries that depend on low-skilled workers, who are often in the U.S. illegally.
"We need to have access to workers to keep manufacturing in the U.S.," said Elizabeth Dickson, adviser on global immigration services to Ingersoll-Rand Co., a conglomerate that makes products such as door locks, golf carts, road machinery and refrigeration equipment. While the company tries to establish the legitimacy of its work force, it realizes some workers -- particularly in unskilled or semiskilled trades -- probably are undocumented, she said.The company has had to terminate several experienced workers after receiving notification from authorities that their documentation, such as Social Security numbers, wasn't legitimate, she said. "We are a business trying to do everything right," Ms. Dickson said. "We need a mechanism to legally employ [semiskilled] workers."
Janet Riley, senior vice president for public affairs at the American Meat Institute, which represents 250 meatpackers and processors, said the industry faces a "shallow" labor pool that couldn't survive without immigrants.
"We need a solution that will address and provide a legal work force," said Barbara Alvarez, president California Landscape Contractors Association, which represents 2,500 companies that are facing a severe labor shortage. Recently, she said, she has had to fire several experienced workers at her company on learning they didn't carry authentic documents. "I can't find native workers to replace them," she said.
Brinker International Inc., the restaurant company that owns Chili's, Maggiano's Little Italy and Romano's Macaroni Grill, reports that 29,000 of its 100,000 employees are Latinos, many of them immigrants. "From a restaurant-industry perspective, immigration policy should work to connect willing employers with willing employees," said Joe Taylor, vice president of corporate affairs.
In July testimony to the Senate Judiciary Committee, the president of the American Health Care Association said "America's health care system...is straining due to a shortage of key caregivers necessary to care for a rapidly aging population." Hal Daub, the AHCA official, said 52,000 certified nursing assistants were needed immediately to meet existing demand for care. "Our current immigration system cannot handle our continuing need for foreign-born workers," he said, calling for a path to permanent status and eventual U.S. citizenship for undocumented workers in his industry.
About half of the 1.8 million farm workers in the U.S. are illegal immigrants.
Farmers in California's Central Valley, the richest agricultural region in the U.S., had to extend the latest harvest season for grapes, peaches, plums and other fruit because of a worker shortage. As a result, there was decay and a drop in quality. "Some farmers lost half their crop," said Pat Ricchiuti Jr., president of the Fresno County Farm Bureau. "We need these [immigrants] as much as they need us," said Mr. Ricchiuti, who owns P-R Farms Inc., a diversified farming company.
It's unlikely that Congress will take any measure that would seriously harm the ability of powerful industries like agriculture to find cheap workers. On the other hand, it does seem likely that Congress would take steps to bar skilled potential immigrants to come to America.
Edward Alen and Stephani Kirchgaessner write in the Saturday Financial Times:
"The US government is poised to propose rules that could restrict the ability of Chinese and other foreign nationals to engage in high-level research in the country, a plan that is generating fierce opposition from companies and universities.The move comes amid growing fears in the US that its relatively open rules allowing foreign nationals to work with sensitive technologies leave the country open to espionage."
Posted by dan at 09:16 AM
Many sectors of the U.S. economy, from retailers to manufacturers, have done heroic work in absorbing the higher costs of raw materials and commodities and thus protecting consumers from the ravages of inflation.
Builders are apparently doing their part, too. Janet Morrissey of Dow Jones Newswires reported in the Wall Street Journal on Saturday:
The Associated General Contractors of America warns that higher prices for building materials and shortages of cement could take a toll on construction through 2006, with commercial projects potentially being hit hardest.Although the latest figures from the Bureau of Labor Statistics show that consumer prices, other than energy and food, remain moderate, the construction industry is facing a variety of steep price increases.
"Inflation at the consumer level remained moderate last month, but many construction inputs are going through the proverbial roof," said Ken Simonson, chief economist with the Associated General Contractors, a trade group.
He said the price index for copper and brass rose 21%, asphalt 18%, gypsum products 15%, plastic construction products 13%, and concrete materials 10% between October 2004 and October 2005.
Diesel fuel experienced the biggest spike, rising 59% over the past 12 months, he said. The cost of diesel fuel affects the operation of off-road equipment, such as tower cranes and bulldozers, as well as dump trucks and concrete mixers, he said. "And the truckers who deliver construction materials are passing through higher diesel costs in the form of fuel surcharges on most deliveries," Mr. Simonson said.
Posted by dan at 09:10 AM