Friday, January 29, 2010

Time to declare the recession over

The Dept. of Commerce reported this morning that GDP in the U.S. grew at a smart 5.7 percent annual clip in the 4th quarter of 2009. Coupled with 2.2 percent growth reading for the 3rd quarter, it now looks like the Great Recession is over. All that's left now is for the National Bureau of Economic Research and maybe Punxsutawney Phil to make the final announcements.

Growth in the economy, especially growth at 5.7 percent, is good news. However, it only means that the economy has turned the corner--not that it's dug itself out of the hole. Even with two quarters of increases, the real level of GDP has only recovered to the level it was at in the 4th quarter of 2008 and remains below the pre-recession peak. The unemployment recession is also dragging on.

There were also positive and negative signs in the growth figures themselves. In the good news column, the net export position of the U.S. improved (imports and exports both grew, but exports grew faster). Also, the economy achieved growth despite a deceleration in government spending. In the bad news column, a substantial amount of the growth in the 4th quarter was attributable to businesses restocking inventories. Inventory growth could be a drag in future quarters.

Wednesday, January 27, 2010

Coble commends O'Keefe

Rep. Howard Coble is a co-sponsor of a House Resolution (H.Res. 809) to honor the neo-Nixonian, James O'Keefe III. The resolution commends O'Keefe for his "exemplary actions." It goes on to say that O'Keefe is "owed a debt of gratitude by the people of the United States."

More here.

Toyota's woes

While many American's might be tempted to cheer Toyota's quality, recall, and now production and sales woes, they might want to think again.

Toyota announced last week that it was recalling 2.3 million vehicles in the U.S. because of suspected problems with the gas pedals becoming stuck in those cars. However, other than identifying that problem might exist, Toyota does not appear to have a strategy for fixing it.

Yesterday, Toyota announced that it was suspending production and sales of the affected vehicles while it determines the exact cause of the problems.

Toyota's problems would seem to be good news for the Big-Three American automakers--GM, Ford, and Chrysler--which have struggled for years against Toyota's reputation for high-quality manufacturing. In time, Toyota's problems could give the U.S. automakers a boost. If nothing else, consumers will be considering a wider range of cars than they would have before the recall.

However, Toyota's problems are bad news for the struggling U.S. economy. The suspension in sales hurts owners and employees at U.S.-based dealerships.

Worse, Toyota will be suspending production at several North American plants. From yesterday's announcement
Toyota is expected to stop producing vehicles on the following production lines for the week of February 1 to assess and coordinate activities. The North America vehicle production facilities affected are:
  • Toyota Motor Manufacturing, Canada (Corolla, Matrix, and RAV4)
  • Toyota Motor Manufacturing, Indiana (Sequoia and Highlander)
  • Toyota Motor Manufacturing, Kentucky – Line 1 (Camry and Avalon)
  • Subaru of Indiana Automotive, Inc. (Camry)
  • Toyota Motor Manufacturing, Texas (Tundra)
These shutdowns won't help the economic or employment recovery. The communities in Indiana, Kentucky, and Texas certainly aren't cheering.

Americans tend to think of foreign-owned corporations as the enemy. However, when those corporations invest and produce in the U.S., Americans benefit. Toyota's current problems are more than just Toyota's concerns.

What really bugs us

The Nixonian tendencies of conservatives die very, very hard.
A conservative activist who made undercover videos of the liberal community-organizing group ACORN was one of four men charged Tuesday with attempting to illegally access and manipulate the phone system in a district office of U.S. Sen. Mary Landrieu of Louisiana.

Joseph Basel, 24; Robert Flanagan, 24; James O'Keefe, 25; and Stan Dai, 24, were charged with entering Landrieu's New Orleans office under "false pretenses for the purpose of committing a felony," according to a news release from the local U.S. attorney's office. The office is federal property.
Let's see if O'Keefe tries to pin this on ACORN as well.

Tuesday, January 26, 2010

Let them drink tea

South Carolina Lt. Governor Andre Bauer shows his compassion and respect for human life.

Lt. Gov. Andre Bauer has compared giving people government assistance to "feeding stray animals."

Bauer, who is running for the Republican nomination for governor, made his remarks during a town hall meeting in Fountain Inn that included state lawmakers and about 115 residents.

"My grandmother was not a highly educated woman, but she told me as a small child to quit feeding stray animals. You know why? Because they breed. You're facilitating the problem if you give an animal or a person ample food supply. They will reproduce, especially ones that don't think too much further than that. And so what you've got to do is you've got to curtail that type of behavior. They don't know any better," Bauer said.

In South Carolina, 58 percent of students participate in the free and reduced-price lunch program.

Bauer's remarks came during a speech in which he said government should take away assistance if those receiving help didn't pass drug tests or attend parent-teacher conferences or PTA meetings if their children were receiving free and reduced-price lunches.

Bauer's proposal comes down to taking children's meals away if they or their parents don't measure up.

Teachers will tell you that for some needy children, school breakfasts and lunches are the only meals that they can depend on.

The USDA reports that as the country entered the recession, household food insecurity, that is, the lack of "access at all times to enough food for an active, healthy life for all household members," was at its highest point since the government began measuring this in 1995. Among households with children, more than one in five were food insecure at the end of 2008.

Food insecurity in South Carolina over the three years preceding the report (2006-8) was nearly a full percentage point higher than the national average.

The voters of South Carolina should send Lt. Gov. Bauer to his room without supper, not its poor children.

Monday, January 25, 2010

Lots of piggies at this particular trough

If you're asking why in the world a group of "investors" would put money into a hotel project in downtown Greensboro with such poor economic prospects, you're asking the wrong question. The "investors" are playing much, if not all, of this game with other people's money--they've got very little skin in the game. Several of the "investors" also stand to immediately take money out of the project if it goes forward.

From a Triad Business Journal article about the original project in early December
At the moment, the Urban Hotel Group, led by co-developer Bridget Chisholm, is proposing a seven-story, 216-room, $47 million luxury hotel and parking deck to be funded almost entirely with federal stimulus money in the form of "recovery zone facility bonds," as well as New Market Tax Credits and tax-increment financing. Just $1 million in private investment is planned.
Updated reporting last Friday on the numbers doesn't indicate a much higher personal stake in the revised proposal.
Kaplan told City Council on Tuesday that the entire project represents a $52.5 million investment, with $12.5 million of that representing the estimated value of Elm Street Center and all the land it sits on between Elm and Davie Streets. New construction is loosely estimated at $40 million. Of that, $26 million would come from the low-interest, stimulus-related bonds. Kaplan cannot say yet where the remaining $14 million would come from (if they need that much), but some portion could come from New Market Tax Credits, bank financing and/or cash put in by the development partnership.
And the on-line copy of the proposal from the News-Record has redacted the key financial information.

However, long before the first hotel room goes unsold, lots of people will have made a bundle. From the Friday article,
Kaplan confirms that Bridget Chisholm, who heads the Urban Hotel Group, would claim a developer’s fee of about 5 percent, or roughly $2 million, but he says that she has agreed to take only a "small portion of that amount out at closing" and leave the rest in the project as equity.

He also says that his investors’ group, made up of about 10 Greensboro businesspeople, may take out about $1 million in cash at closing in compensation for selling the office building attached to Elm Street Center so that it can become part of the project.
In addition to this, Skip Alston, will take home a substantial fee for brokering the deal. And it appears that Deena Hayes may benefit as well through her connection with developer John Greene.

So, Chisholm gets a developer's fee of up to $2 million; Kaplan's investors' group will take out "about $1 million;" Alston gets a broker's fee (which he's not willing to disclose); and Deena Hayes' friend John Greene personally benefits from the construction. And all of this money comes out before the first guest passes this white elephant by.

I'm still waiting to see if Max Bialystok and Leo Bloom are in on this.

So many foreclosures, so little time

You would think that with all of the underwater and distressed properties around, banks wouldn't be terribly eager to foreclose on extra properties. Sadly, you'd be wrong, as ABC News reports
Some 2.8 million homeowners faced the threat of foreclosure last year, but it wasn't supposed to happen to Charlie and Maria Cordoso. In 2005, the New Bedford, Mass. couple paid in full -- in cash -- for a house in Springville, Fla., and rented it out with plans eventually to use the home as a retirement getaway.

They said they were shocked to learn earlier this month that Bank of America had locked them out and removed their clothing and furniture from the property.
The story goes on to report that BofA is being sued for foreclosing on other properties on which it did not hold or service mortgages.

You know that the mortgage system is stacked against homeowners when a company can foreclose on any property at all. In this case, BofA appears to have padlocked the property, removed possessions, and shut off the utilities. And all this appears to have occurred after BofA was informed that it was targeting the wrong property.

All in a day's work for BofA--it will probably even pay a bonus for the entrepreneurial forecloser.

Friday, January 22, 2010

Not so cool news

So much for skeptics' arguments (wish) that the Earth's climate is cooling. NASA has released a new analysis.
The first decade of the 21st century was the warmest ever on Earth according to data released by scientists at NASA.

The U.S. space agency's data also revealed that 2009 was the second warmest year since temperature records began in 1880, and only narrowly cooler than 2005, the warmest year ever.
Interested readers can also look at the NASA news release.

UPDATE (1/26/10): Ever careful, Pino makes the excellent point that the article describes the last decade as the warmest "ever" and is also unclear about 2005's place in history. The NASA article that is linked describes these records properly.

Sen. Harkins' proposal to restore democracy

Sen. Tom Harkin (D-Iowa), who has long been an opponent of the anti-democratic filibuster in the Senate, is introducing sensible legislation to rein in the practice.

The filibuster--the ability to indefinitely continue debate--is a Senate perogative, not a Constitutional requirement. Although the ability to filibuster has been in the Senate's self-adopted rules since 1806, the first filibuster was not made until 1841. Filibusters were rarely used before 1970. Even through the turbulent 1960s, it was unusual to have more than a handful per year.

The last session of Congress saw a stunning 139 motions for cloture filed. The current session is on a pace to meet that unfortunate record with 67 motions already filed. Prior to the last session of Congress, the highest number had been 82 motions, which occurred during the Republican-controlled Senate in 1995-6. These numbers understate the effect of the filibuster because legislation is often stymied by its threatened use.

The rules regarding filibusters are also not set in stone. Procedures were modified in 1975 to make it easier to filibuster (Senators didn't actually have to take the floor to talk) but also easier to invoke cloture (the threshold for closing debate was lowered from 67 to the current 60 Senators).

According to The Hill,
Under Harkin's bill, which is co-sponsored by Sen. Joe Lieberman (I-Conn.), 60 votes would still be necessary to cut off debate on an initial procedural motion. If senators failed to reach 60 votes, a second vote would be possible two days later that would require only 57 votes to cut off debate. If that also failed, a third vote two days after that would require 54 votes to end debate. A fourth vote after two more days would require just 51 votes.
Sen. Harkin's proposal for multiple and repeated cloture votes provides an opportunity to extend debate. A minority of Senators who were concerned about a bill or nomination would have extra opportunities to convince their colleagues and the public of their case. However, a majority of Senators could eventually hold a vote.

Sen. Harkin's raises obvious partisan concerns. If it were currently enacted, it would take power away from the small Republican minority. To gain the necessary bipartisan support (67 votes are required to change the Senate rules), Sen. Harkin should make the rules effective for the start of the next presidential term--that is, at the start of the 113th Congress in 2013.

Thursday, January 21, 2010

What TSA worry?

Now comes word that Errol Southers, President Obama's nominee to be director of the Transportation Security Administration has withdrawn from consideration after having the vote on his nomination blocked by a handful of Republican senators.

The Senate stands athwart democracy. It starts as a supremely unrepresentative body. Within that, archane practices effectively give individual members unilateral veto power.

Senate gamesmanship has cost the country the services of a consummate law enforcement and security professional. Southers began his career with the Santa Monica police department, was an FBI agent, and headed security for the Los Angeles County Museum of Art. In 2004, he was appointed by Republican governor Arnold Schwarzeneggar to be the deputy director of California's Department of Homeland Security, and in 2007, he moved to become the assistant chief at the Los Angeles World Police Department. He has also taught at the University of Southern California on security since 2003.

Souther's record included a blemish--while an FBI agent 21 years ago, he misused his authority to order and conduct a background check on the boyfriend of his estranged wife. He was censured by the FBI. As the record shows, however, Southers went on to have an exemplary career and enjoyed bipartisan support.

It's also clear that Southers had strong bipartisan support in the Senate had there been the opportunity to hold a vote.

Southers case is just one of dozens that the Republicans are holding up. As of last Friday, 177 of President Obama's nominees still await Senate votes. Meanwhile vital national work goes undone.

Monday, January 18, 2010

Blessed are the weapons makers...

An ABC News report answers the thorny theological question, "What kind of gunsight would Jesus use?"
Coded references to New Testament Bible passages about Jesus Christ are inscribed on high-powered rifle sights provided to the United States military by a Michigan company, an ABC News investigation has found.

The sights are used by U.S. troops in Iraq and Afghanistan and in the training of Iraqi and Afghan soldiers. The maker of the sights, Trijicon, has a $660 million multi-year contract to provide up to 800,000 sights to the Marine Corps, and additional contracts to provide sights to the U.S. Army.

...One of the citations on the gun sights, 2COR4:6, is an apparent reference to Second Corinthians 4:6 of the New Testament, which reads: "For God, who commanded the light to shine out of darkness, hath shined in our hearts, to give the light of the knowledge of the glory of God in the face of Jesus Christ."

Other references include citations from the books of Revelation, Matthew and John dealing with Jesus as "the light of the world."

Sunday, January 17, 2010

Recovery plan for Haiti

In a Washington Post op-ed, Jeffrey Sachs outlines immediate and near-term plans for Haiti's recovery. The Obama administration and international agencies should listen.

Thursday, January 14, 2010

Atom Smith

I'm preparing to teach a new freshman seminar class in the fall on Markets and Morality. Part of the preparation involves reading great texts that I never got around to before. The current book on the desk is The Worldly Philosophers by Robert Heilbroner.

It shames me that in some 40 odd years as a reader and 25 years as a pretending or practicing economist, I never picked up this classic. It's especially mortifying given that the book has been recommended many times.

Heilbroner is a masterful writer and narrator. A modest testament to the dexterity and draw of his prose is that my reading of his book was delayed by several weeks after my 15-year-old son snatched it from atop the "to read" pile.

Anyway, I wanted to share Heilbroner's summary (p. 71) of Adam Smith's philosophy and theoretical contributions.
The complex irrational world is thus reduced to a kind of rational scheme where human particles are magnetized in a simple polarity toward profit and away from loss. The great system works, not because man directs it, but because self-interest and competition line up the filings in the proper way; the most that man can do is to help this natural social magnetism along, to remove whatever barriers stand before the free working-out of this social physics, and to cease his misguided efforts to escape from its thralldom.
What a fantastic metaphor.

It's going to be hard to think about much else for the rest of the day--which, come to think of it, should be the point of great writing.

Wednesday, January 13, 2010

Ultimately we must accept climate change

Too much social discourse is directed at magnifying disagreement and disparaging the motives and intellect of others. In Why We Disagree about Climate Change: Understanding Controversey, Inaction and Opportunity (Cambridge University Press, 2009), Mike Hulme takes the position that reasonable people can and do disagree; he then sets off to examine the disagreements and the reasons.

Hulme explores numerous areas of disagreement and organizes his chapters around specific areas. He begins with three mostly (though not entirely) science-oriented sources of disagreement, which involve our conceptualization of climates and climate change, the development of scientific thought regarding climate change, and what science can and cannot tell us. From there, he moves onto disagreements regarding economics, religion, fears, communication strategies, development, and government action. The book ends with a provocative chapter about rethinking climate change.

My own nerdy biases initially drew me into the first chapters, especially the history of scientific thought regarding climate change. Hulme points out that scientific acceptance of the notion that climates change is relatively recent, dating only to the 19th century. Widespread scientific acceptance of the theory of anthropogenic climate change on human time scales is newer still. Although components of the theory, such as the greenhouse effect, were developed in the late 19th and early 20th centuries, it wasn't until the last quarter of the century that broad elements of the scientific began to broadly accept anthropogenic global warming.

However, accepting the likelihood of anthropogenic global warming is only a scientific preliminary. For effective public policy, we need to know much more, including how strong the link between human activities and climate change is, when and how fast systemic changes are likely to occur, how the effects will be distributed, and what the possibilities are for catastrophic changes. As we move into these important areas, the scientific disagreements become larger, and the opportunities for other sources of disagreement to influence scientific discourse also grow.

At a first reading, I was initially disappointed with most of the follow-on, non-scientific "disagreement" chapters. The chapters work well enough in listing and explaining many ways that people can disagree about things. However, they do not explain which disagreements really matter and whether there are fundamental and connecting sources to the disagreements. There are interesting arguments and insights along the way, but much of the material reads like a middle-of-the-road undergraduate term paper--"it could be this (source A), it could be that (source B)," and so on.

Different readers will nonetheless appreciate different things in these chapters. As an economist, I enjoyed an outsider's take on my profession's disagreements. The discussion of development challenges was also very good, especially in reminding us of how many times smart, careful, and concerned people from Malthus to the Club of Rome have predicted doom only to discover that humans have innovated, adapted, and prospered within the then-existing environmental constraints.

The deeper rationale behind these chapters, though, became clearer after reading the final chapter. A central point of that chapter and ultimately of the book is that climate change is here, and the notion of climate change can't be undone. Climate has changed and will change, and humans, to some extent, are affecting this change. Once we accept this, we cannot "unknow" anthropogenic climate change.

Another crucial point in the chapter is that we are unlikely to "solve" the climate change "problem" in any conventional sense in our lifetimes. "Solving a problem" implies meeting a particular objective; in the case, of climate change, what would that be? Suppose that science could give us the magic key to setting the planet's climate--where would we set it? Do we want a pre-industrial climate, a 20th century climate, something warmer, something cooler. Also, (and this is the part where the non-science chapters come in) which objectives do we adopt?

Hulme instead advocates for the more sensible position of living with climate change. To be clear, he does not mean this in a fatalistic sense or as a call for a "do nothing approach." Hulme does mean that we must accept that human activities affect the global climate and that those activities have consequences that impede other objectives. He reminds us that our behavior and policy setting should focus on those objectives rather than the fact of climate change.

Tuesday, January 12, 2010

Happy to have blown a forecast

Last winter, I wrote two posts that discussed "rational" crime. The gist of the posts was that the standard rational choice model predicted that as the economy soured and legitimate economic opportunities decreased, crime, especially property crime, was likely to increase. The posts cited economic studies that indicated that a one percent increase in unemployment was associated, on average, with a one percent increase in the property crime rate. In one of the posts, I wrote that "people, business owners, and law enforcement will need to be more vigilant during the tough economic months ahead."

Well, it's a year later, and preliminary crime statistics for 2009 for Greensboro and the rest of the U.S. are in. For the first half of 2009, the FBI reports that
  • property crimes were down three percent (mostly due to a decrease in burglaries), and
  • violent crimes were down 12 percent (including a one-third drop in rapes and a 23 percent drop in aggravated assaults).

Okay, well, that's just one city and half a year (e.g., does anybody really believe that Greensboro's total year burglary rate will be down?). What do the statistics for the U.S. indicate?

For the entire U.S., the FBI reports a six percent drop in property crimes and a four percent drop in violent crimes.

Like any good empirical researcher, I can remind people that the statistics are preliminary and give a dissertation on the problems with the statistics. I can also point to the empirical association between the economy and crime rates representing an "expected" outcome with considerable variation around that expectation (think, e.g., about hurricane forecasts). I could even write that "people, business owners, and police departments" seem to have heeded my advice (judging from my site's stat counter, those 25 viewers were very influential).

But the bottom line is that the outcome did not match up with expectation, which is good news for most people.

Monday, January 11, 2010

More from the hidden kingdom of misfit toys

It looks like we're on another heavy metal ride with Chinese-made children's toys.
Barred from using lead in children's jewelry because of its toxicity, some Chinese manufacturers have been substituting the more dangerous heavy metal cadmium in sparkling charm bracelets and shiny pendants being sold throughout the United States, an Associated Press investigation shows.

...A patchwork of federal consumer protection regulations does nothing to keep these nuggets of cadmium from U.S. store shelves. If the products were painted toys, they would face a recall. If they were industrial garbage, they could qualify as hazardous waste. But since there are no cadmium restrictions on jewelry, such items are sold legally.
Many of the poisonous toys were found on Walmart shelves. So much for that company's Toy Safety Net inspection program announced a year and a half ago.

Congress needs to close this loophole immediately.

Friday, January 8, 2010

Harassment pure and simple

In the wake of the University of East Anglia e-mail scandal, a group of liberal activists has now made a tit-for-tat demand for the e-mails and other files of an outspoken climate-change skeptic, Dr. Patrick Michaels.
Greenpeace has filed a Virginia Freedom of Information Request with both Virginia Gov. Tim Kaine's (D) office and the University of Virginia demanding an array of correspondence concerning Patrick Michaels, a senior fellow at both the conservative Cato Institute and at George Mason University. Michaels also held the title of Virginia's official climatologist starting in 1980 until Kaine announced in August 2006 he did not consider Michaels as holding that honorary post.

The FOIA to Kaine requests any "letters, email, faxes, reports, meeting and teleconference agendas, minutes, notes, transcripts, tape recordings and phone logs generated by or involving Dr. Patrick Michaels regarding global climate change (a.k.a. global warming)."
Dr. Michaels' previous employment at the University of Virginia and his current employment at George Mason University are each state-related, potentially making him subject to FOIA requests (Dr. Michaels long claimed an official state title, possibly compounding his woes).

The group has also made similar demands at the institutions of several other outspoken researchers.

While I disagree vehemently with Dr. Michaels' positions and with many of his activities, he deserves the opportunity, as an academic, to write and research without turning over his work materials.

The FOIA demands are naked harassment. Requests of lists of funding sources and conflict of interest statements seem reasonable; however, requests for e-mails and other written materials are not.

It's not too late for Greenpeace to put this particular genie back in the bottle; however, I'm not holding my breath (benefits to the biosphere notwithstanding).

Tuesday, January 5, 2010

Taylor swiftly rebukes Bernanke

I had a good seat on Sunday for Fed Chairman Ben Bernanke's defense of the Fed's monetary policy from 2000 on. Bernanke was attempting to refute the arguments that monetary policy following the 2001 recession was too easy and that it helped to inflate the housing bubble.

In his speech, Bernanke compared the Fed's federal funds targets over the period to the Taylor Rule, a guideline developed by Stanford economist, John Taylor, that describes how interest rates should respond to deviations of inflation and output from target levels.

Bernanke showed that if standard, contemporaneous measures of inflation and output were included in the formula for the rule, Fed policy did appear to be too easy. However, he argued that those measures were not appropriate--a different measure of inflation should be used and that forecasts of the input values should be used rather than contemporaneous measures. When these measures were substituted, the Fed's policies appeared to be much closer to the Taylor rule.

In an interview today, however, Taylor called shenanigans on Bernanke.
John Taylor, creator of the so-called Taylor rule for guiding monetary policy, disputed Federal Reserve Chairman Ben S. Bernanke’s argument that low interest rates didn’t cause the U.S. housing bubble.

"The evidence is overwhelming that those low interest rates were not only unusually low but they logically were a factor in the housing boom and therefore ultimately the bust," Taylor, a Stanford University economist, said in an interview today in Atlanta.
But, hey, what would Taylor know about his own rule.