Monday, July 24, 2006

From the "Never worked a day in his life" department

NY Times:Cities Shed Middle Class, and are Richer and Poorer for it

SOME big American cities are flourishing as at no time in recent memory. Places like New York and San Francisco appear to be richer and more dazzling than ever: crime remains low, new arrivals pour in, neighborhoods have risen from the dead. New York is in the throes of the biggest building boom in 30 years, its population at an all-time high and climbing. Mayor Michael R. Bloomberg proudly promotes his city as “a luxury product.”

But middle-class city dwellers across the country are being squeezed.

This time, they are being squeezed out by the rich as much, or more so, as by the poor — a casualty of high housing costs and the thinning out of the country’s once broad economic middle. The percentage of middle-income neighborhoods in metropolitan areas like Los Angeles, Chicago and Washington has dropped since 1970, according to a recent Brookings Institution report.

The percentage of higher-income neighborhoods in many places has gone up. In New York, the supply of apartments considered affordable to households with incomes like those earned by starting firefighters or police officers plunged by a whopping 205,000 in just three years, between 2002 and 2005.


Of course, cities need police officers, firefighters, teachers. But as long as they can get the labor they need from somewhere nearby, some economists say, middle-class shrinkage may not hurt. In Southern California, developers import construction workers from Las Vegas and put them up in hotels; costs go up but rich clients can pay. Firefighters who want to live in high-priced cities can work two jobs, said W. Michael Cox, chief economist for the Federal Reserve Bank of Dallas. “I think it’s great,” he said. “It gives you portfolio diversification in your income.” Pay for essential workers like plumbers and cabdrivers will tend to go up, he said.

If working two jobs to put a roof over your head is a good thing, why doesn't Mr. Cox give it a whirl and see how much he appreciates the "portfolio diversification of his income"? Who needs to see the wife and kids?

Sunday, July 23, 2006

When you don't know what you don't know, you don't know nuttin'

Interesting interview with David Gunn, former head of Amtrak on the Philadelphia Inquirer website.

CAPE BRETON, Nova Scotia - Even now, David Gunn isn't sure who in the Bush White House wanted to kill Amtrak. What he does know is that Amtrak's opponents came very close to getting their wish.

As the Bush administration threatened to cut off funding last year, Gunn, then Amtrak's president, and other Amtrak managers feared that the beleaguered national rail line would collapse financially or that passenger safety might be jeopardized.

Gunn was fired Nov. 9 in a dispute with the Amtrak board over how to modernize the rail line. He said in an interview on his Nova Scotia farm that he warned the Bush administration that its threats to force Amtrak into bankruptcy could prompt suppliers to demand cash and creditors to seize assets, effectively shutting the rail line down.


The way the Bush administration managed Amtrak "is almost a microcosm for the whole bloody administration, because it is what they have done everywhere," said Gunn, a Republican. "It has gotten them in trouble with FEMA; it has gotten them in trouble with Iraq. They just don't trust their own management."

How to do that has become a huge issue. Arguing that Amtrak was an outmoded relic, administration officials last year threatened to withhold money to force the rail line's restructuring.

But Gunn said the strategy came close to backfiring. Vendors began demanding cash, an insurer resisted renewing vital liability coverage for Amtrak officers, and directors and Amtrak auditors declined to certify its financial statements.

The standoff caused Moody's Investors Service to downgrade Amtrak's debt rating, and threatened to prevent needed repairs to failing track switches, overhead power lines, bridges, and other critical infrastructure, Gunn said.

After decades of deferred maintenance, some track switches had become so unreliable that Amtrak had to assign staff to monitor them 24 hours a day. Gunn said Amtrak eventually made the necessary repairs.

"What we said was, 'Look, we have trains running at 150 miles an hour - you have human beings riding that stuff,' " Gunn said.

Throughout his conflict with the administration, Gunn said senior transportation officials repeatedly suggested that Amtrak could revitalize itself by filing for Chapter 11 bankruptcy protection - like a bankrupt airline, it could void its labor contracts.

"Oh, I think they felt... somehow, out of the wreckage, would come a new company," Gunn said.

But he said that bankruptcy for Amtrak could have caused a service shutdown - in a way it never would for an airline - because of the nature of the passenger rail business, which is mostly unprofitable and lacks competition.

Amtrak was formed from the remains of several bankrupt private passenger lines in 1970. It is responsible for service in the heavily traveled Northeast Corridor between Washington and Boston, as well as on 16 long-distance lines traversing much of the country.

Amtrak also provides service on shorter-range lines in Pennsylvania, New York, Michigan, California and other states, which share the costs.

It has never turned a profit, and requires billions of dollars in government subsidies.

And that is the problem, Gunn said. Because no other company has Amtrak's experience running a national passenger rail service, Gunn said it was highly improbable that any other rail line could have stepped in had Amtrak gone out of business. The airline industry offers no comparison, he said, because its losses are smaller and another airline is always available to take over the business of companies that fail.

Gunn took over as head of Amtrak on May 15, 2002, and quickly moved to cut costs, establishing a new bookkeeping system that gave managers a clearer idea of how much money they had and how much various Amtrak operations cost. Before he arrived, Gunn said, the rail line was charging as much as $200 million a year of day-to-day operational costs to accounts set aside for replacing bridges, rail and other infrastructure.

Among financial auditors, the practice is considered a transgression roughly comparable to a homeowner's taking out a second mortgage to pay for food and clothing.

For a time, Amtrak stabilized. Gunn reduced staffing, and began repairing aging bridges and neglected track. But his relationship with the administration abruptly changed when the White House budget cut Amtrak's federal funding from $1.2 billion to zero.

Amtrak's vendors - companies that furnished fuel oil, food and other supplies, debt holders, and rating agencies - were startled.

Its auditor, KPMG, declined for months to sign off on its financial statements or to certify that Amtrak would make it through another year. That meant Amtrak risked being in default of its loan agreements, raising the prospect that creditors could seize assets such as the high-speed Acela train, Gunn said.

But he maintained that the Bush administration never took the possibility of collapse seriously, although its officials seemed to take every opportunity to make matters worse.

After the administration released its budget, the Amtrak board of directors barred Gunn and other rail managers from asking Congress for money, as they had in the past.

In May, in another move that Gunn interpreted as a tightening of the financial vise, Mineta wrote Gunn to inform him that the Transportation Department would withhold about $60 million in cash reserves until the department was sure Amtrak would survive. Gunn and the Transportation Department agree that Congress required Mineta to inform Gunn that the money would be withheld to pay for shutdown costs if the rail line failed.

But Gunn said Mineta greatly complicated matters by releasing the letter to the public. Vendors deluged the rail line, demanding cash. Particularly concerned, Gunn said, were the credit card companies that Amtrak customers used to purchase their tickets.

He said Amtrak managers worried that those companies might demand faster payment or, worse, require Amtrak to post as much as $100 million in reserves to insure payment if Amtrak went bankrupt. Gunn said the credit card companies never forced the issue, but if they had, Amtrak would have been bankrupted.
"We managed our way through; it wasn't them [the Bush administration]," Gunn said. "They didn't do anything to help us. They did a lot to hurt us."

When you have to remind someone there are human beings riding passenger trains, it seems like there is not much basis for hope. Maybe the administration will get its wish soon and bankrupt Amtrak. When the Northeast corridor comes to a halt and the already overloaded roads and highways in the region are even more jammed (and many people just cannot get to work at all) I'm sure it will enhance their reputation as competent administrators of the public good.

Bread and Circuses

The Nation:Born-Again Rubinomics

When Robert Rubin speaks his mind, his thoughts on economic policy are the gold standard for the Democratic Party. The former Treasury Secretary, now executive co-chair of Citigroup, captured the party's allegiance in the 1990s as principal architect of Bill Clinton's governing strategy, the conservative approach known as "Rubinomics" (or less often "Clintonomics"). Balancing the budget and aggressively pushing trade liberalization went hard against liberal intentions and the party's working-class base. But when Clinton's second term ended in booming prosperity, full employment and rising wages, most Democrats told themselves, Listen to Bob Rubin and good things happen.

So it's a big deal when Robert Rubin changes the subject and begins to talk about income inequality as "a deeply troubling fact of American economic life" that threatens the trading system, even the stability of "capitalist, democratic society." More startling, Rubin now freely acknowledges what the American establishment for many years denied or dismissed as inconsequential--globalization's role in generating the thirty-year stagnation of US wages, squeezing middle-class families and below, while directing income growth mainly to the upper brackets. A lot of Americans already knew this. Critics of "free trade" have been saying as much for years. But when Bob Rubin says it, his words can move politicians, if not financial markets.

Rubin has launched the Hamilton Project, a policy group of like-minded economists and financiers who are developing ameliorative measures to aid the threatened workforce and, he hopes, to create a broader political constituency that will defend the trading system against popular backlash. A strategy paper Rubin co-wrote defines the core problem: "Prosperity has neither trickled down nor rippled outward. Between 1973 and 2003, real GDP per capita in the United States increased 73 percent, while real median hourly compensation rose only 13 percent."

Astorm is coming, Rubin fears. He wants a new national debate around these facts. In an interview, he explains the danger he foresees for global trade: "Where there's a great deal of insecurity, where median real wages are, roughly speaking, stagnant...where a recent Pew poll showed 55 percent of the American people think their kids will be worse off than they are, I think there is a real danger of heightened difficulty around issues that are already difficult, like trade.... Look at the difficulty around immigration."

Princeton economist Alan Blinder, a Hamilton participant and Federal Reserve vice chair in the Clinton years, describes the "difficulty" in more ominous terms: "I think the prospects for the liberal trade order are not great," he says. "There's a whole class of people who are smart, well educated and articulate, and politically involved who will not just sit there and take it" when their jobs are moved offshore. He thinks CNN commentator Lou Dobbs, who has built a populist following by attacking globalization and immigration, "is just the beginning--nothing compared to what's going to happen in the future."

What should we make of Rubin's heightened concern for the "losers" who, he now recognizes, include a vast portion of the populace? Many view the Hamilton Project as just more talk-talk. I regard it as an important event--a "course correction" in elite thinking that, given Rubin's influence, may reshape the familiar trade debate, at least among Democrats. Rubin's central objective, however, is to control the terms of debate: to address the economic disparities globalization has generated but without disturbing anything fundamental in the global system itself.

His program consists mostly of familiar ideas that might soften the pain for displaced workers. But I doubt the Hamilton proposals will do much, if anything, to reduce the global forces that are depressing incomes for half or more of the American workforce. Even Rubin is uncertain. When I ask if his agenda will have any effect at all on the global convergence of wages--the top falling gradually toward the rising bottom--he says: "Well, I think that's a question to which nobody knows the answer. I think the proposals and approach we are proposing are the way to get the best possible outcome for the United States in a complicated world.... But whether that's going to stop the global convergence of wages, I don't know the answer to that. I would guess the answer is no."


The "soft" ideas in the Hamilton Project playbook are mostly old ideas--improve education and retraining, provide "wage insurance" payments to dislocated workers, increase public investment in industrial development and infrastructure. All are worthy things to do, but they seem like tinkering around the edges. Ron Blackwell, chief economist of the AFL-CIO, observes, "What they've got going are these little ideas that sound like they are forward-looking and respond to the problem of living standards, but they don't speak to power."

The right-of-center tilt of Rubin's group is reflected in some secondary proposals that are sure to rattle Democratic constituencies: Reform education by weakening teacher tenure, linking it to student performance; reform the system for tort litigation to eliminate what Rubin describes as "vast excess today" (his own firm suffered from tort litigation when it had to pay billions to settle investor lawsuits for Citigroup's role in the financial fraud at Enron and other corporate scandals).

The "hard" economic propositions in Rubin's agenda are essentially the same ones he pushed successfully in the Clinton Administration: Balance the budget to boost national savings and thereby (Rubin assumes) reduce the country's horrendous trade deficits and enormous capital borrowing from abroad, where the creditors are led by China and Japan; advance more trade agreements if possible, but don't tamper with the trading rules or international institutions that currently govern the system.

So we keep doing what is wrecking our economy and pump up unemployment compensation, build (or repair) more infrastructure, allow corporations to stiff arm people they wrong (Bhopal here we come!), bust the teachers' unions and put them on a piecework basis (I'm sure special ed and inner city students will be well served), and spend more retraining folks to train their replacements from India. Basically anesthesia for the heart transplant donor. Oh and we're going to do all this while balancing the budget (at least until the whole edifice collapses as the bottom 95% see their income go into free fall, kinda hard to balance the budget when no one has income to tax, eh?)

Strange things

Ford Shotgun
One Word: Why?

Yahoo/AP:Feline felon suspected in glove thefts

PELHAM, NY ......As if the gardeners of Pelham don't have enough to worry about, with the rocky soil and the slugs and the big trees casting too much shade, a feline felon has been sneaking into their back yards and carrying off gardening gloves.

Goche's flower-patterned number may soon take its place on the clothesline that's strung across the front fence at Willy's home, which he shares with Jennifer and Dan Pifer, their 19-month-old son Hudson and a mutt named Peanut Chew.

Above the line is a sign that says, in words and pictures, "Our cat is a glove snatcher. Please take these if yours."

On Thursday morning, nine pairs of gardening gloves and five singles were strung up, nicely framed by the Pifers' flourishing tomato and basil plants. Willy, looking innocent, was playing with a beetle under the Subaru in the driveway and occasionally dashing after Hudson.

"This all started about the time people began working in their gardens, I guess March or April," Jennifer Pifer said. "Willy would just show up with a glove, or we'd see them on the front steps. I guess it's better than if he was bringing home dead birds."
She doesn't know how far afield Willy goes to find a glove, but she has learned it takes him two trips to bring home a matched pair.

Willy, born to a stray last spring and taken in by the Pifers as a newborn, stays out some nights but seems to assemble his collection in daytime raids.
Willy couldn't care less about the gloves after they're captured. On Thursday he could not be enticed into a grab-the-glove game.

In winter, when gardening gloves are hard to find, Willy switches to his offseason prey, dirty socks, which he brings from the laundry room.

"We find them in the hallway, on the stairs," she said. "I used to think, `Oh, I must have dropped it on the way down.' But now I know better."

Despite his criminal nature, neighbors get a kick out of Willy. Cassone said the cat likes to accompany the mailman up and down the block, all the way to each front door. Willy also likes to climb trees and bat at the heads of people below.

Sunday, July 16, 2006

Isn't this classy?

Day by Day

Let's see here, we'll equate Jack Murtha with Cindy Sheehan then we'll accuse him of being a selfish coward. Who says Republicans aren't working to elevate the discourse?

The guy may be many bad things but he's hardly a stereotypical limp wristed "other cultures are superior to ours" liberal. Could we maybe have something a bit more adult than "you're a coward/you're not a patriot" as a response to policy disagreements?

Wednesday, July 05, 2006


Haven't posted for a while. It's amazing how 70+ hour workweeks keep one occupied. Hopefully things will settle down soon.