The Multiplier that Matters

John Phipps takes on Greg Mankiw. Here's a taste:

The esoteric world of economists is reveling in the attention the ideas put forth to revive our languishing economy have generated. I have watched with interest as the normally tepid prose of the profession becomes more heated (OK - warmed) as various proposals are offered.

One powerful argument is represented by Greg Mankiw, who offers (to me at least) persuasive reasons why tax cuts at the top and to businesses will give us the biggest bang for the buck. He has also offered reasoned arguments on the issue of growing inequality over the past few years....

Let me suggest it is far more crucial to our economic health to convince more Americans our system still works for them, not just some. Further, doing more of the same, i.e. cutting top tax rates, does little toward that goal, even if the models suggest it is the best of all possible choices. In contrast, everybody gets to use good roads or new schools.

I get proponents' point about multiplier effects and how tax cuts are the fastest, easiest most powerful way to jump-start the economy. But it looks a like a economic sugar high to me. And recent tax cuts produced an awful lot of ephemeral wealth, it seems. Surely a mixture of the two should not be dismissed out of hand by the economic community.

Academia's estrangement from the real world by virtue of tenure allows it a curious detachment from such ideas that engage non-tenured minds, at least until sufficient historical data accrues to make it worth studying. This myopia seems most pronounced the further up the ladder experts ascend. I have begun to weigh opinions from private sector economists with more respect, since they have much more on the line when they put forth proposals.

Our economy is suffering from a crisis of confidence by a large number of people who don't even know what a multiplier is. Or particularly care. And oddly enough, their opinions matter too. Actions that cause them to view the future with less alarm, or make less dysfunctional econiomic decisions are not to be despised.

Right now everyone, including the rich, is unnerved by the economy. The money being sent to the banks by the Feds is not being lent. Some of it is being blown on bonuses, dividends and acquisitions—but a lot of it is being stuffed in the vaults. Tax cuts without a change in social psychology will just lead to more money being "stuffed into mattresses".

Moreover, as Mr. Phipps points out, infrastructure has tremendous multiplier effects on the future productivity of the economy. America has suffered through years of underinvestment in the public and private sector. We plunged into debt to fund consumption, not investment. Now we have a fairly massive infrastructure deficit along with an enormous financial debt. The ribbons of steel, concrete and fiber that our economy flows across are worn out and overloaded. Rebuilding them will not only put people to work (and in the process inspire confidence) but also lays the groundwork for future growth and prosperity.

Military Budget Crisis looming

The Big Picture: US Military Force Structure

My takeaways:
Massive Defense Budget cuts are coming due to competing Civilian Demands.
Military budgets are already inadequate for stated plans.
The Military is not structured for the missions it is taking on (Iraq, Afghanistan)
"....you can NOT train a force to do both kinetic war and win “Hearts and Minds” the psychological imbalance not only precludes a force from doing both, but when you try, you fail at both."
Procurement is utterly broken.
"....our current direction of recapitalization cannot be sustained in the face of fiscal realities, and it is probably the wrong direction anyway. Give the delays in new programs and the “LULL” that will exist in delivering them, there is about a 5 year gap in the 2013-2018 timeframe when our current readiness will drop below operational levels. Our current inventory was built on non-wartime metrics.
The 5 years of combat we have had has aged equipment 16-20 years and acquisition programs cannot keep pace and they are unfunded at even that level. For example HUMVEES were programmed for 8000 miles per year. The current inventory in the past 5 years has surpassed the 20 year life of the vehicle (i.e. the average is in excess of 150,000 miles). The vehicles replacement is due in 2014, but is expected to slip to 2018."

Opinion:
Either we need to transition to a full war footing or we need to disengage from Iraq and Afghanistan. No matter what we do we are going to be un-breaking the military for years, possibly a decade or more. We need a military that can "kill people and break things" a lot more than we need one for peacekeeping and that should be the basis for allocating resources.

Our one defining victory of the 20th Century was won on the China model. The "arsenal of democracy ' and the Russian war machine produced vast quantities of adequate weapons swamped the small number of fussy wonder weapons the Germans had. Like a bronze age king though we brought the vanquished enemy's fallen idols into our temple and bowed down before them. We became the ones counting on our wonder weapons that we could never afford to produce in quantity. Our resources are much larger than the German state so it took longer for us to hit a wall but we have. Moore's law does not apply to defense. If anything, it seems to be inverted.

The Death of Perspective

Michael Lewis, writing about the financial crisis, offers this bon mot:

OUR financial catastrophe, like Bernard Madoff’s pyramid scheme, required all sorts of important, plugged-in people to sacrifice our collective long-term interests for short-term gain. The pressure to do this in today’s financial markets is immense. Obviously the greater the market pressure to excel in the short term, the greater the need for pressure from outside the market to consider the longer term. But that’s the problem: there is no longer any serious pressure from outside the market. The tyranny of the short term has extended itself with frightening ease into the entities that were meant to, one way or another, discipline Wall Street, and force it to consider its enlightened self-interest.

This is the essence of the crises we face politically and economically: the short term has utterly eclipsed the long term in the consciousness of our leaders. We have sold our inheritance for a bowl of Porridge. Whether it is the Congressman handing the bill writing over to the Lobbyist or the Rating Agencies selling AAA ratings to Investment Banks. Credibility earned over decades is being pissed away for short term advantage.

Economically, it is even worse, as Angry Bear guest writer "Edward Charles Ponzi Jr" writes:

In time, our current society will be seen as one that ate all the food in fridge, all the food in the pantry, sent out for pizza, maxed out the credit cards and then burned the furniture while proclaiming that we are really very warm and well-fed. Financial historians in the future will say, "what were they thinking?" about our era.

We are seeing the inevitable conclusion of the World's dumbest pyramid scheme wherein those at the top of the pyramid have sought to destroy those at the bottom. Demand, kept on life support by the pawning of America, has finally collapsed.

An Odd Thought

The latest wave of fraud (Madoff) and the first wave of fraud (subprime) have both featured ethnic ties exploited by hucksters. Madoff was a pseudo-mensch who preyed upon the Jewish community. During the subprime debacle lots of of minorities were led into terrible mortgages by Judas goat Mortgage brokers who were their race or spoke their language.

Class Warfare

Dean Baker: More Class Hatred in the Washington Post

The Post editorial, after deploring the fact that bailout money was diverted from Wall Street to the real economy, celebrated the pay cuts that the bailout would impose on UAW workers. For some reason, the Post attaches enormous importance to reducing the pay of auto workers who earn $28 an hour. It shows no comparable concern for reducing the pay of auto industry executives to parity with their foreign competitors. (The top executives at Toyota, Honda, and other successful companies get paid in the neighborhood of $1-2 million a year. Unlike their U.S. counterparts, they don't get paychecks in the tens of millions of dollars even in the best years.) The Post has allso never felt the need to insist on large pay cuts for Wall Street executives even though their banks are now wards of the state.

Somehow resenting the excess pay of someone who makes 1000 times as much as you is the "politics of envy" while resenting the pay of someone who makes a few percent more than you do is "populism".

WMDs on Wheels?

Today's Trucking: Poultry a Road Hazard?

Apparently, it's not diesel exhaust exposure you should worry about when pacing behind another tractor-trailer. Instead, you might want to roll up the windows and hold your breath if you're ever trailing a live chicken hauler.

According to a new study by researchers at Johns Hopkins University, chickens hauled in crates on open flatdecks can release antibiotic-resistant bacteria along the highway and into vehicles traveling behind them.

There's a happy thought if the Bird Flu ever goes virulent.

Pay to Play is alive and well

Daniel Howes, Detroit News: Cashing in on double standards

The feds pump another $20 billion into teetering Citigroup Inc. and insure $306 billion in bad assets just days after Congress slaps Detroit's automakers for failing to table "a plan" to justify $25 billion in loans and folks 'round here cry, "Double standard! Double standard!"
......Double standard? You bet, but it's more than a geographic cabal of coastal Democrats and anti-union, pro-foreign auto Republicans from the South that clearly has it in for Detroit. It's money and political alliances, folks, neither of which the boys at General Motors Corp., Ford Motor Co. and Chrysler LLC have in abundant supply.
How come Citigroup gets a pass and a big fat check? First, failure of its sprawling operations truly would pose a mortal threat to the global financial system. Second, the banking giant is exceedingly well connected to the campaign wallets of the very same folks -- and their allies -- who are poised to foist draconian terms on Detroit to keep it afloat.

Howes goes on do detail all the incestuous ties between the twits who brought us the financial crisis and the Democratic powerbrokers. It's a good thing that John McCain did such a bang up job getting corporate money out of Washington.

One Question

It sounds like Congress had a great deal of fun hectoring the heads of the automakers and the union. One thing that bothers me though. If the principle holds that people who fail deserve a pay cut then it seems, given the failures in regulation and oversight at the root of this financial disaster, to be pertinent to ask "Where is Congress' pay cut?"

Make no mistake the vast sums of borrowed money from Uncle Sam Hu being stuffed into the carcasses of the banks this Thanksgiving are intended to save, not the assets of the imprudent Bankers, but the asses of the Congressmen whose sins of omission and commission were the prerequisites to this slow motion disaster.

[Update: Mitch Albom lays down a delightful rebuke of Congress.

Is a man an interchangeable part?

Right now the UAW is trying to present a united front with the management of the Big 3 but under the surface is a bitter mutual dislike. The UAW sees management as being incompetent, overpaid, and quick to blame the union for its own failures. Management for its part is very bitter about the above market wages and benefits that the unions are able to extract for "unskilled labor" and union workers "inflexibility".

Building a car with competitive efficiency is a highly complex process involving careful design of both the car and the production process. Henry Ford and Walter Chrysler both had the ability to build a car from the ground up with their own hands. Such skills are rare, though, and both turned to masses of semi-skilled laborers, used in very carefully engineered ways, to build their cars. One of the essential points of such an arrangement is that employees are expected to be like the parts they assemble: interchangeable. The process is developed with the intention that any capable person could be placed in any position on the line and keep up. There are some more skilled positions (usually in maintenance and setup) that require more education and pay a little more but the principle holds.

Is it any wonder that people trained to think that a person is an interchangeable part would find the idea of a few people making a huge multiple of what everyone else makes absurd? Management would take the other side and argue that paying a worker nearly double what another worker off of the street would cost* is absurd.

For my wooden nickel, the workers have the better side of it. But then again this is a world where a great inner city school teacher makes far less than a mediocre backup quarterback in the NFL.

*The difference in cost is not so much the wages and benefits being paid to the person on the line, but in pensions and benefits being to retirees that are part of the contract with workers.

A Little Naughty Fun

John Emerson explains the economic crisis.

An appetizer:

Tranches are bundles of loans mysteriously sorted and packaged according to how risky they are. Large corporations buy tranches and use them as collateral to borrow money from other large corporations. These corporations are owned partly by individuals, but mostly by still other large corporations, which themselves might very well also be owned by more large corporations yet. In the end you have millions of actual home loans at one end and millions of actual individual investors at the other, with an undecipherable maze of legal entities and financial instruments linking them. (You might as well discuss quantum theory, it’s easier). Few or none of the flesh and blood owners have any idea what’s going on, until finally one day they wake up and BOOM! their money is all gone. (If anyone knows what happened, it’s probably the managers hired to manage these various legal entities, but they have just voted themselves enormous bonuses and never have cared to socialize or communicate with the pitiful rabble who own the stock anyway.)

Economists don’t worry about these things, though. (Nader does, but Nader isn’t an economist and he’s crazy too.) Economists worry about welfare Cadillacs, transfer payments, and waste in Democratic budgets. Government, in sharp contrast to the free market, is inefficient and corrupt and can never do anything right.

So long and thanks for all the votes

Chicago Tribune: Obama's team on economy reflects times

In Chicago on Friday, President-elect Barack Obama will meet with his economic transition team. It's a group that looks a lot like America, or an America that wears very well-tailored suits, anyway.

Often, the "looks like America" phrase, which originated with the Clinton administration, is shorthand for saying the assembled members are not all white men. But the typical measures of diversity—race and gender—are not the principal distinctions in this case.

The America in this group of 17 high-powered advisers is the America of our troubled economy. Wall Street is represented, and so is Detroit. There's a dot-commer, an old-media guy, a real estate investor and some politicians.

....Perhaps the most interesting part of the grouping is the notable swath of the economy that is, in many respects, left out: industrial America and organized labor.

....The lack of labor presence might raise questions about whether Obama truly is committed to revising terms of the North American Free Trade Agreement to protect labor's interests. But perhaps the presence of Bonior, who opposed NAFTA as a representative from suburban Detroit, should put suspicions to rest.

I'm sure Obama will be "interested" in the Rust Belt again in time for the next election.

The Myth of the Spendthrift American

Robert Reich slaps a bad idea across the snout and sends it whence it came:

Post Meltdown Mythologies: Americans Have Been Living Beyond Their Means

What brought on the economic meltdown of 2008? Besides the bursting of the housing bubble, Wall Street's malfeasance and non-feasance, and Washington's massive failure to oversee Wall Street, fingers are also being pointed at average Americans. Some of them took on mortgages they couldn't afford, of course, but we're also hearing a more basic theme that goes something like this: For too long, Americans have been living beyond our means. We went too deeply into debt. And now we're paying the inevitable price.

.....But this story leaves out one very important fact. Since the year 2000, median family income has been dropping, adjusted for inflation. One of the main reasons the typical family has taken on more debt has been to maintain its living standards in the face of these declining real incomes.

.....The "living beyond our means" argument suggests that the answer over the long term is for American families to become more responsible and not spend more than they earn. Well, that may be necessary but it's hardly sufficient.

The real answer over the long term is to restore middle-class earnings so families don't have to go deep into debt to maintain what was a middle-class standard of living. And that requires, among other things, affordable health insurance, tax credits for college tuition, good schools, and an energy policy that's less dependent on oil, the price of which is going to continue to rise as demand soars in China, India, and elsewhere.

In other words, the way to make sure Americans don't live beyond their means is to give them back the means.

The hollowing out of the American middle class had the perverse effect of simultaneously holding down wages and interest rates. Jobs are outsourced to China, driving down demand for American Labor (and thus the price). China sends many of those dollars back to the US (to raise the price of the dollar versus the Yuan) and as a side effect lowering long term rates. For the worker it's rather like being robbed and then offered a low interest loan from your own wallet by the mugger.

Blame America First (it's bipartisan!)

The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.

One of the recurrent Republican lines about Democrats is that they are America haters in favor of unilateral disarmament. The logic goes, supposedly, that if America were to disarm other nations would feel less threatened and would spend less on their militaries and we all could devote more spending our domestic economies.

But if you think about it, the standard libertarian Republican holds the same basic belief translated to the economic realm. Pretty universally, they claim Government (the people we elect) is the problem. Never mind that if you elect them these same Republicans would be by definition "part of the problem" and no longer "part of the solution". When it comes to trade, the idea is that if we dropped all of our trade barriers that we would be better off. Remarkably enough American workers cannot compete with subsidized foreign competition.

An Army is not that different from a manufacturing business. Chuck Norris movies to the contrary, militaries primarily consist of taking a large number of people and investing in training and equipment with the hope that the operation can outcompete rivals. The American military swept Iraq from Kuwait and later swept into Iraq without much difficulty because of the massive capital investments of the preceding decades. It wasn't that the Iraqi soldiers were especially cowardly, lazy or stupid, it was that they could not compete with the much more subsidized American competition.

Many countries competing with us for jobs hold down the real wages of their workers by Union suppression or currency manipulation and do not regulate pollution or workplace safety. Developed and Developing Nations are paying companies to build facilities in their jurisdiction. American workers are not especially lazy or stupid but they cannot compete with the much more subsidized foreign competition.

The hits keep on coming

Today's Trucking: Yup, carbon the next truck 'pollutant' targeted

Caterpillar has already announced it's leaving the US on highway engine market thanks in large part to the 2010 rules. Daimler has announced an end to the Sterling line (and the firing of 4500 workers) in March of 2009 thanks in part to the upcoming rules and the aftermath of the 2006 prebuy (though given Daimler's history it seems possible that this move was in part in retaliation for the 2006 strike in the Sterling plant in St Thomas, ON).

Now in the midst of this, the EPA has another wonderful plan to reduce choice and increase cost. We were emitting less carbon (i.e. burning less fuel) before the EPA killed fuel economy with the last rule changes (and the trucks cost $20K less). now the EPA will work hard to make sure we can pay even more and maybe get the economy we had before.

Come Home America

Fortune: Made (again) in America

Talk of a reverse migration of manufacturing from China to the U.S. has been buzzing across union halls and factory floors, corporate boardrooms and Wall Street.

The cost of shipping outsourced goods from China to U.S. customers has doubled in just two years thanks to high oil prices, and labor costs in China are rising sharply.

I suspect that a lot of the low end manufacturing that was done in China will wind up in Latin America. America will benefit where we have an existing base of facilities and talent. China likely will still be a force in high tech goods and other items that are labor intensive and have a high value to weight ratio. Going the other way, I wonder what the impacts of high transportation costs on U.S. agricultural exports will be?

When the various free trade agreements were inked, the line was that Americans would be moving out of low value manufacturing and into high value Information Technology jobs. Rising energy costs are having a much bigger impact on moving physical goods than on moving data. Perhaps Paul Krugman was right.

A Building Legal Storm

Attorney general Brown sues 2 port trucking firms over labor practices

California Atty. Gen. Edmund G. Brown Jr. filed lawsuits against two small trucking companies on Friday on grounds they allegedly deprived drivers of benefits and "cheated the state of California out of thousands of dollars in payroll taxes."

Brown said in a statement that the lawsuits filed in Los Angeles County Superior Court signaled a crackdown on trucking companies at the adjacent ports of Los Angeles and Long Beach that classify drivers as independent contractors to circumvent state employment taxes and labor laws, and have an unfair advantage over competitors

Fed Ex Ground has been sued successfully on this basis in multiple jurisdictions. I suspect the California AG is hoping to establish a precedent for truckload carriers (which would be huge). In addition to the state potentially collecting millions in back taxes from trucking firms in the state, it would open the door for Port truckers to organize for better wages, something they are unable to do as "independent contractors".

This may also be a means to preempt the American Trucking Association's challenge to the Ports of Los Angeles' and Long Beach's plans to require all drayage operators to use employee drivers. Most of the current drayage fleets will not survive settling up with the State for back taxes.

The precedents are working their way through the industry. I suspect the first National Truckload carrier targeted will have a lease-purchase/captive finance program, pay a flat rate per mile, and have forced dispatch. Each of those makes the driver a bit more like an employee (with, as one wag put it, a 100 thousand dollar lunchbox).

Rapidly rising costs and the soft freight market are going to change the lease purchase business model rapidly. I expect the looming legal fights will just accelerate the process. Many "independent contractors" are in multi year leases/loans for traditional square nosed tractors which are now uneconomical to operate and are losing value rapidly (much like the used SUV market is imploding). Pre-buying new trucks to avoid 2008 emissions rules, the collapse of construction (a common 2nd home for the traditional design trucks),and marginal operations exiting the business have loaded up the used truck lots. Exports of used trucks will help, but it is going to take time for the market to clear. Tighter credit conditions will also be a drag.

In an Instant Everything Changed

Guelph Mercury: Anatomy of a car crash

That moment before impact -- the split second when Mary Wybrow lost control -- remains vivid in her memory, even two years later.

"I just remember thinking, 'Oh my God,' and then, 'Bang!' " the 59-year-old retired teacher says, smacking her hands together to emphasize the force.

"Something hit us. Or I hit something."

The collision left Wybrow in hospital for weeks. It destroyed a car and a transport truck, closed Highway 401, sprung a small army of emergency services into action and required a costly cleanup.

For the people in the cars and trucks that crawled by the wreckage west of Cedar Creek Road on Aug. 17, 2006, it was likely just another crash. It wasn't fatal and it got only a small mention in the newspaper.

For the four people involved in the crash -- three in Wybrow's car, one behind the wheel of the truck -- the impact reverberated long after the mangled pieces of Wybrow's Taurus were swept away. There were emergency rooms, traction, surgery, bills to be paid, meals to be made, lost sleep, nightmares. For Wybrow's son, Kemal Koyu, there was a lingering feeling of soaring.

Most truck drivers will be involved in a serious accident eventually. Even if you are not at fault you feel absolutely terrible.

For Want of a Nail

The Telegraph: How a flat tyre took the Caucasus to war

Trouble had been brewing in the disputed South Ossetian region for weeks as Moscow-backed militias skirmished with Georgian troops, yet Russian-brokered negotiations between the Georgian government and the separatists had continued.

But the first substantial face-to-face talks on August 7 fell through after a farcical chain of events in which the top Russian diplomat claimed he was unable to attend the meeting in South Ossetia because his car tyre had run flat.

Refusing to take his excuse at face value, the Georgian delegation then assumed they were being lured into a trap, and began the shelling that invited the Russian invasion.

The article goes on to mention that the Georgians were given Satellite photos by the Americans showing the Russians were sending tanks into South Ossetia while the peace talks were occurring. Still, it is amusing to think that the war started from a flat tire. Archduke Ferdinand, Patron Saint of obscure reasons for going to war, would be proud.

CNN does another Hatchet Job on the trucking industry

Medically unfit truckers still on the road, safety study shows

Hundreds of thousands of tractor-trailer and bus drivers in the United States carry commercial driver's licenses, and some of those drivers have suffered seizures, heart attacks or unconscious spells, according to a new U.S. safety study obtained by The Associated Press

There are "hundreds of thousands" of CDL holders and "some of those drivers" have medical problems. Well, how many is some? I'm not sure if this is a poorly written sentence or if the writer is trying to pull a fast one.

According to to the FMCSA there are varying estimates of the number of truck drivers on the road. The CDLIS system, which holds information on current and former CDL holders in all 50 states, has 11.4 million entries. Federal Estimates of the number of people currently working as truck drivers range from 2.9 million to 4.8 million. So there's more than "hundreds of thousands" of CDL drivers out there.

Truckers violating federal medical rules have been caught in every state, according to a review by the AP of 7.3 million commercial driver violations compiled by the Transportation Department in 2006, the latest data available. Texas, Maryland, Georgia, Florida, Indiana, Pennsylvania, Illinois, Michigan, Alabama, New Jersey, Minnesota and Ohio were states where drivers were sanctioned most frequently for breaking medical rules, such as failing to carry a valid medical certificate. Those 12 states accounted for half of all such violations in the United States

Once again we have a pseudostatistic. We are told medical violations are part of 7.3 million violations, but we are not told how big of a part they are. Are they one percent or twenty percent? "Failing to carry a valid medical certificate" can encompass everything from not having the paper CDL physical on your person (not a big deal) to actually not having a current physical (a big deal). You can't renew your CDL without a current medical certificate so folks without one are not going to be doing that forever. Many states also will void your CDL if they don't have a current cert on file for you (one copy goes to the carrier, one to the State, and one to the driver). Being in possession of a piece of plastic that says "CDL" on the front doesn't necessarily mean that you really have a CDL (just like you can still possess a driver's license even though it is suspended).

Now to the case studies:
A Virginia trucker with a prosthetic leg from a farm accident more than 10 years ago is permitted to drive tanker trucks until at least 2012, even though he doesn't have the proper federal paperwork required for amputees. Virginia revoked the medical license for the official who approved him to drive over charges the official was caught illegally distributing controlled substances.
Well, he's probably going to be driving after that too. The scam is that in order to be certified with a prosthetic you have to demonstrate 2 years of safe operation of a Commercial Motor Vehicle with a prosthetic (which you can't legally do without a valid medical certificate). Shades of M.C. Escher.

George Albright Jr., 61, smashed his 70,000-pound tractor-trailer into congested traffic on Interstate 70 in June 2006, killing four women in a Ford sedan about 30 miles east of Columbia, Mo. Albright's employer agreed earlier this year to pay $18 million in a settlement. A Missouri jury acquitted Albright this month on four counts of second-degree involuntary manslaughter, after his lawyers argued in court that a diabetic episode "put him in an altered state of consciousness." Albright wasn't injured.
If the diabetes is controlled without insulin, he's legal. Obviously if he was indeed having a diabetic episode he wasn't managing his diabetes. The medical examiner under any conceivable system is only going to see the driver every so often. If we are going to allow diabetics to operate CMVs we are going to have to depend on them managing their own condition.

The driver of a 15-passenger "Tippy Toes" day-care bus traveling 63 mph on Interstate 240 in Memphis, Tenn., in April 2002 crashed into a bridge, killing the driver and four of the six children aboard. The National Transportation Safety Board said the driver, Wesley B. Hudson, 27, fell asleep, "quite likely due to an undiagnosed sleep disorder." Investigators said children sometimes had to wake up Hudson, whom the NTSB described as obese and a marijuana user.
A 15 passenger van does not require a CDL. According to the NTSB report Mr Hudson did not have a CDL (PDF, page 5). He had a regular Tennessee license with a "for hire" (taxi) endorsement. Indeed, one of the unimplemented recommendations of the governor's commission that investigated the tragedy was to require child care transport workers to have a CDL. But the AP doesn't let any of this stand in the way of a good story.

The dog that didn't bark in this story is the fact that there are no health requirement for operators of RVs, no matter their weight or size, and that states often allow farms and other intrastate operators of trucks to follow much less rigorous standards.

Also left out is the fact that the CDL physical is nothing more than a basic physical. The doctor making the decision about whether or not to certify the driver only has the driver's answers to the health questionnaire, their direct observation, and a urine test to go on. The physician does not have access to the driver's medical records.

A question of incentives for CDL medical examiners might be raised. The article mentions efforts to avoid "doctor shopping" by drivers, but what about carriers? The physical is paid for by the company, which will usually contract with a doctor to perform the exams. It might seem that a "picky" doctor could be at risk for work being sent elsewhere. I don't know that that is a realistic concern for most of the doctors out there, but there probably are a few conflicted physicians on the margins.

Puzzling

Truck tonnage rises in May

The American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index increased on a month-to-month basis for the first time since January of this year, edging 0.5 percent higher in May. April’s tonnage reading fell a revised 0.6 percent instead of the previously reported 1.1 percent drop.

The seasonally adjusted tonnage index equaled 114.8 (2000 = 100) in May. The not seasonally adjusted index increased 1.1 percent to 118.3 from 117.1 in April.

The seasonally adjusted index was 3.3 percent higher compared with May 2007, marking the seventh consecutive year-over-year increase. In April, the year-over-year gain was 2.2 percent.

ATA Chief Economist Bob Costello said that May’s tonnage reading represents a positive step forward, but noted that freight volumes remain mixed across the industry amid continuously rising fuel prices and a weak economy.

“The fact that tonnage increased on a month-to-month basis for the first time in four months, as well as achieving its largest year-over-year gain since February of this year, is quite positive,” Costello said. “However, year-over-year comparisons continue to reflect the weakness of 2007 rather than robust growth in 2008.”

High diesel fuel prices continue to place a significant burden on motor carriers, he said. “Rising fuel prices are a double-edged sword for the industry,” Costello said. “Since trucks haul virtually all consumer goods at some point in the supply chain, the industry is significantly impacted both directly through high diesel prices and indirectly as consumers have less money to spend on truck-transported goods.”

Truck tonnage seems to have been moving in a range with a flat trend the last four years. I am surprised that the decline in automotive and housing related shipments is not having more of an impact (automotive related shipments alone are about 8% of total tonnage). Less than Truckload Carriers have been reporting drops in shipments the past few months, auto production is falling to 16 year lows, housing starts are at 17 year lows, supposedly massive amounts of freight is moving from trucks to trains, but truckload tonnage is back up to where it was in May 2006.