The Rebirth of Robert Reich, and the Debate to Come

Republicans are gonna love this. Robert Reich, former Harvard professor (currently at the University of California, Berkeley’s Goldman School of Public Policy) and Clinton-era Secretary of Labor, wants to resurrect Keynesian economics. The whole post is worthy of your time, but this paragraph in particular caught my attention:

What the hawks don’t get is what John Maynard Keynes understood: when the economy has as much underutilized capacity as we have now, and are likely to have more of in 2009 and 2010 (in all likelihood, over 8 percent of our workforce unemployed, 13 percent underemployed, millions of houses empty, factories idled, and office space unused), government spending that pushes the economy to fuller capacity will of itself shrink future deficits.

Remind me, again, why is the economy currently underutilized? I bet Republicans will say it is because the market isn’t allowed to run wild and crazy and free. Or they’ll just ask for more tax cuts for the uber-wealthy, in a perpetuation of the only-the-mighty-know-best theory. I know they’ll be lining up at Walmart at 4am, I just know it.

So, if the private sector won’t invest enough, maybe the general public will? Some how I don’t think so. Our paychecks seem to be getting smaller, our credit cards are maxed out, and we’re all dead scared of losing our jobs and our benefits. And no small ‘stimulus’ check for $600 is going to change that. Besides, what was your experience like last time, did it just get swallowed up by the credit card monsters, eh?

Nope, it’ll have to be the spender of last resort, Big G, government. Spending money on fixing roads and bridges before they fall down, repairing levees and ports before they reach breaking point; investing in mass transit, improving our water supply, investing in new sources of energy and new ways of conserving energy. Sounds like stuff we could all use.

Reich’s love affair with Keynes isn’t new. In fact, Reich’s piece for Time Magazine’s 100 Most Important People of the Century is a nice primer on Keynesian economics. Here’s where Reich repeats the nub of it:

Keynes’ basic idea was simple. In order to keep people fully employed, governments have to run deficits when the economy is slowing. That’s because the private sector won’t invest enough. As their markets become saturated, businesses reduce their investments, setting in motion a dangerous cycle: less investment, fewer jobs, less consumption and even less reason for business to invest. The economy may reach perfect balance, but at a cost of high unemployment and social misery. Better for governments to avoid the pain in the first place by taking up the slack.

I might just be a Keynesian. Just don’t tell the Republicans.

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Better not get sick, or old

The deficit hawks are all a twitter. With the President-Elect (and most world leaders) planning a significant economic re-investment package, there’s folks already calling for stripping off all unnecessary spending.

Put aside that cutting back on spending would have a de-stimulating effect on the economy. And forget for a while who is most impacted by the current economic crisis (hint: it isn’t the CEO’s of Bear Stearn, Lehman Brothers, GM, Citibank, or AIG). Let’s think about what targetting wasteful spending really means.

We couldn’t convince the McCain campaign of this, but “you get almost nothing from cutting waste, fraud, and abuse“, according to Robert Bixby of the Concord Coalition. As I mentioned previously, cutting earmarks and making government more efficient just doesn’t add up to very much. Laudatory? Yes. A solution to deficit spending? No.

So, that leaves the two other big elephants in the room. The so-called entitlement programs and the military. Chop, chop. That’s their heads on the block, isn’t it? You can hear it already. To be fiscally responsible we’re going to have to cut back on Medicare (for the elderly and disabled) and on Social Security.

I get upset when we put these programs in the “unnecessary” or “wasteful” category. Not only are they some of the most successful and popular government services, but they are also some of the most efficient. And, right now, the most necessary. As health care costs are outrageously high and our 401K balances outrageously shrinking, we are going to need Medicare and Social Security more than ever. Maybe the uber-wealthy won’t need ’em, but the rest of us will.

Perhaps we could all show a little ‘personal responsibility’ in our twilight years. But, somehow I still don’t think I’m going to be able to afford a night or two in hospital. Instead, we might start seeing more and more hard-working citizens out pan-handling or in the soup kitchens, looking for a handout to get them through the winter.

John Engen, I hardly know you

While leaders all around the world are investing in their own communities, our Mayor John Engen is busy cutting back. That’s right – at a time when local businesses are hurting, when unemployment is rising, and when our city keeps on growing, we’re spending 3.7% less.

What Engen is doing is shifting the costs more directly onto you. That’s right. When your car has to go into the shop for repairs because you hit one too many potholes, Mayor Engen has shifted the cost from his budget to yours. And when you stumble on one of the poorly lit sidewalk curbs, you can be sure the City’s saving dollars while you’re paying the hospital bill for a twisted ankle. Likewise when the aging water pipes burst, it will be your basement that will flood while we postpone the inevitable cost of fixing the decrepit infrastructure. And when yet another cyclist or pedestrian gets killed because we’re still waiting for the roundabout at Arthur/Mount/Beckwith or waiting for the road at Russell / South 3rd to be completed, it could well be because Public Works was understaffed and overworked. You get the picture. That 3 minute delay from the Police Department or Fire Department might mean the difference between protecting your life and property, but we couldn’t afford to be fully staffed could we? But, hey, the City’s saving money – that’s the main thing!

I think my Mom would have said, “Penny wise, Pound foolish.” Every year we put off the repairs to our aging infrastructure, the more it is going to cost. Every time we save a little right now, the more risk we take of catastrophic failure down the road. If you fail to pay for the flu shot, don’t be surprised when you have to stay home from work when you get sick. (And, yes, the City-County Health Department also had its budget cut!)

Maybe it’s a question of what the money is being spent on. The recent Greater Downtown Master Plan cost some $450,000 and public funds paid for roughly 75 percent. I shudder to think how much was put into the old Fox Theater site, which the City purchased in 1984 but I’m still waiting to see if we’ll get anything more than a patently ugly parking lot. And I know we’re still paying for the promised features of the Ogren-Allegiance Baseball Park. Not that these aren’t worthy projects, they are. They’re investments in our future, hopefully to pay off dividends in our quality of life year after year after year.

Now is the time to be laying the foundation for the future, and now is the time that we need the work, the jobs, the business for our local contractors. Mayor Engen, show some real leadership and make some bold investments in our community right now. Don’t be timid, as I know you aren’t. Don’t be nickel and diming us. Step out, be bold. Give us something to rally around. Because we need you now.

Anyone wanna own a bank?

Looks like pieces of Citibank might be up for purchase. Perhaps now would be a good time for the government to own a bank?

Nationalizing Citibank would be big. Really big. Citi was once the largest U.S. bank, with a market value of $274 billion as at the end of 2006. On Friday, it was down to $20.5 billion.

Now without getting too much into the virtues and sins of mark-to-market, it is still worth pointing out that Citi has $50 billion in capital above and beyond what the regulators require to be ‘well capitalized” and has around $2 trillion in assets. (Mind boggling numbers, eh?) Of course, the U.S. Government is responsible for $25 billion of that capital, a function of the $700 billion Troubled Assets Relief Program that isn’t for troubled assets any more.

Citibank is almost certainly in the TOO BIG TO FAIL category. So, we can expect to see the U.S. Government pony up more bucks, in a move that says the company has adequate capital and liquidity to ride out the crisis and thus calms panicked investors.

But, wait a moment. The company is now valued at $20.5 billion. And we’ve already injected $25 billion. Don’t we already own it?

OK, OK, I know. Market valuation isn’t that simple. Citi was worth way more than what we paid when we paid it. And there’s lots of other schmucks sitting on preferred stocks like us. And selling a company isn’t anywhere near as easy as accepting a no-strings-attached check for $25 billion.

But, still. At what point do we get control of the assets and management and decision-making for all the money we’re putting in? I don’t mean more loans or more debt guarantees. When do we get to own the whole shebang?

Saving our Schools?

Today in the Sunday Missoulian’s color supplement, Parade, there is an interview with Michelle Rhee, the Chancellor of District of Columbia Public Schools. Clearly partisan, it would appear Michelle is gearing up for Republican patronage. Whether she has the best interests of schools and  students at heart now appears questionable.

When asked what the new President could do to help education, Michelle replied taking on the teachers’ unions. She’s not a fan of negotiated contracts it would appear. It’s all about merit-based pay systems in her world. However, stop and think what might be assumed in her anti-teacher stance. Is she assuming that teachers don’t care about learning? Is she assuming that teachers don’t care about their students? If it isn’t the teachers who are going to improve our schools, then who is? More administrators?

When asked about No Child Left Behind, Michelle is a huge proponent. Apparently, it would shift the mindset away from the credentials that teachers have (such as a Masters degree) and towards their achievements in the classroom. Nowhere does she explain what incentive teachers would have to pursue further education. Nor does she explain why expertise in their subject area, or in the latest teaching approaches, wouldn’t help teachers be more effective. But, most telling is her own educational background. Apparently it is OK for her to have obtained a Bachelors and Masters from the Kennedy School of Governance at Harvard University (and presumably her pay check reflects those credentials), but it is not OK to pay for teachers to get a similar quality of education! Does Michelle really believe in education?

When asked about merit-based pay, Michelle starts off by describing teachers who work their butts off. But, if those teachers are given difficult classes, inadequate facilities, and more bureaucratic dictates (such as unfunded testing), then it is unlikely their students will show dramatic improvements. It’s just real hard for students who come from difficult backgrounds to leave the concerns of their home life behind, particularly if the classrooms are rundown, there’s an absence of books, computers and other teaching resources at their schools, and if they are constantly being distracted from learning to ‘study the test’. All those things are beyond the control of the teacher, no matter how good they are in the classroom. Those hard-working teachers are unlikely to be rewarded for their efforts, no matter how hard they work.

Merit-based pay is all about picking winners and losers. Some teachers will do well and some teachers will not. Those who aren’t above average will see their paychecks decline. But, Michelle never quite explains why so many teachers should be thus penalized. And, Michelle never explains why those below-average teachers (I guess that means around 40% of them) are so bad. Nor does she explain why the system will always assume there will be ‘below-grade’ teachers. Rather, after a period of time of being neglected and living on abysmal salaries, many of those teachers will presumably leave the education field. Forget for a moment who will replace them, and ask Michelle if her merit-based pay would then ‘sunset’ and go away? No, I don’t think so. It’s just a system to pay some teachers less.

Finally, Michelle boasts about closing 23 schools and firing 36 principles. Forget for another moment who will replace them (and countrywide there is a shortage of principles, perhaps because teachers would rather teach than administrate!), and think about the process that she used. Was it an arbitrary firing, on the basis of prior neglect and difficulty? Or were the principles fired because of the performance of the teachers they supervise? Sounds pretty vindictive to me, penalizing hard-working people for agreeing to work in trying times. I wonder how the parents of the students felt about it? I wonder how the students felt about it? I know that I wouldn’t be happy to have my school closed down and have to bus across town, for things unrelated to my performance.

God help our Schools if this is their future, because somehow I doubt teachers, principles, parents, and students are going to want to help with this approach. I wonder how Michelle’s job performance is being assessed?

How now brown sow?

I’m a Griz fan. I love the athleticism and I love the spectacle. Griz football is the biggest show in the state.

But, the shine of the University of Montana’s athletic program has certainly started to tarnish. This week, recent Griz star Cody Von Appen, was arrested and jailed for a second assault on a fellow student. The first incident was in September and was captured on a dormitory surveillance camera. Now Von Appen, son of a former Grizzly assistant coach, is accused of a second assault allegedly occurred outside a UM fraternity on Nov. 2.

The question remains why it took a district court judge to bar Von Appen from campus after the first attack. As Bill Oram, editor of the campus newspaper, points out UM Dean of Students Charles Couture banned a group of UM students from campus after they staged a peaceful sit-in in President George Dennison’s office demanding sweat-free Grizzly apparel. But, when football thugs are caught on camera, they get a free pass and can come back to campus.

This is not an isolated incident. Jimmy Wilson, former UM cornerback, was charged with murder in Los Angeles County this last summer. Jeramy Pate, another former UM running back, received a six-year deferred sentence for drug-related home invasion in which one occupant of the house was repeatedly pistol-whipped and a woman was bound with duct tape. He was one four of former Grizzly football players involved in that incident. Pate, like Von Appen, violated the terms of his parole and was rearrested. Then there’s Qwenton Freeman, .who witnessed a fellow UM player commit murder and then was arrested for his own violent misconduct. Last year, Timothy L. Parks was arrested on charges that he pointed a gun at a woman’s head and slapped her while trying to collect a debt. Offensive lineman J.D. Quinn’s has faced a pair of DUI arrests, as if once wasn’t enough.

These incidents need to stop. Clearly there is a systematic problem that must be addressed by the University. These are not ordinary students. They are ambassadors for our campus and for our state. They are pampered beyond belief and receive every possible advantage while associated with the University. Unfortunately, they return that support with disregard and belligerence.

I suggest they have lost the right to make another mistake. There must be better surveillance and quicker action to prevent any more violence by Griz footballers. The air of entitlement that surrounds some college athletes has to be deflated.

Until coach Bobby Hauck is willing to discuss and deal with this problem in public, then the reputation of the whole university will suffer. Our image will continue to be dragged through the mud. And I fear for the fate of our Grizzly Bear.

How now Uncle Detroit?

Democrats are pushing ahead with a bailout of Detroit’s failing automobile industry. Apparently, they and their suppliers are too big to fail. I don’t want to see all those workers lose their jobs. I don’t want to see all those who invested in a proud, American company lose their money. And, I don’t want to see the American automobile industry dominated by foreign corporations, who play by different rules.

But, I want to see some questions answered before taxpayer money is used to bail them out.

For instance, what happens if the taxpayer investment isn’t enough to turn around this juggernaut? If other investors don’t think these companies are a good bet, then why should the government think any differently? Will the government end up owning all the pieces of a failed enterprise? Will the government join the line of creditors owed money? Are we just putting good money after bad?

But, let’s say that the CEO’s of the Detroit 3 are right and all they need is a little rescue from the government. Is a ‘restructuring’ in the forecast? Because, of course, we all know what a restructuring or downsizing or reorganization is – a laying of off the workforce! So, in effect, you and I would be paying for workers to lose their jobs! Wait. Isn’t that we’re trying avoid in the first place?

What I worry about is that the CEO’s and corporate investors will make the claim that it is the ‘uncompetitiveness’ of the Detroit 3 that must be tackled. More code words. I fear that this means getting rid of comfortable union pay scales, worker pensions, and safe workplace conditions. Forget that it was management miscues that got them into this mess in the first place, and forget that senior management isn’t likely to lose much in the long-term. They still need to cut expenses in order to compete against ‘leaner’ competitors!

Perhaps, then, we should get rid of the senior management? Predictably, GM Chairman and Chief Executive Rick Wagoner has “rejected the idea that he might have to step down as part of a federal rescue.” And, I know, we would have to pay “market rates” in salaries for senior management, even though the companies clearly aren’t being priced by those same “market” forces. So, how much should we pay to run companies that aren’t considered “viable”?

What about dividends? Traditionally, shareholders have expected a return on their investment. Will the government receive dividends too? Or, will government be exempt from benefiting from their influx of capital? Maybe, we’ll just see a siphoning off of government money over into dividends?!

Lastly, I wonder what makes AIG (an insurance company) different from, say, GM or Ford? Why shouldn’t we nationalize the automobile companies? After all, this country still needs cars and trucks, so there should be a way to keep everyone employed, provide a more fuel efficient vehicle, and maintain American leadership in the industry. And, if the current CEO’s can’t do it, then why should we think that government sponsorship would be any worse?