Thursday, September 29, 2011

Crude Economics

Driving through Beverly Hills the other day a sign caught my attention. In the visually cluttered metropolis of Los Angeles, that a sign was noticeable is interesting in and of itself. That the sign was from a gas station is even more surprising. That it listed gas at $5.05 per gallon was shocking. This station is in the heart of Beverly Hills, attendants help fill the tank and it was for premium grade. Regular was a bargain at $4.99. It got me to thinking about Michelle Bachman’s promise that if elected she’d bring back $2 gas.

Democrats and comics had a field day. The idea that the President could impact gasoline prices is just preposterous! Right? Don’t tell that to President Ford who created the Strategic Petroleum Reserve in 1975 as a response to the 1973 oil crisis. President Clinton stopped stocking the reserve in 1995, redirecting the funds to other energy projects. President George W Bush (#43) was the first President to tap the Reserve in 2001 as way to “provide energy stability” after the events of 9/11 and the U.S. attacks on Afghanistan. He also returned to the policy of the Government buying and storing oil. In June 2011 President Obama became the second President to use the Reserve – releasing 30 million barrels. He did so out of the uncertainty that the conflict in Libya was causing. Political critics interpreted the action as an attempt by the President to lower fuel costs and help the middle class. (30 million barrels lasted about a day and a half and had no noticable effect on pricing, though the news story showed that the President did something.)

The cost of crude oil only represents 68% of the price. Refining, marketing and taxes make up the rest. The cost of crude was stable for the majority of the last century, and only had wild swings during the first part of last decade (the Owes). Prices tripled from 2003 to 2008.

Why did crude go up so much? Some analysts suggest that because oil is a finite resource the laws of supply and demand are at work. Military conflicts in the Middle East (where most of the exploration is) could be a reason. Others imply nefarious conspiracies that oil prices increased so much under a President who had deep personal and business ties to the industry. Costs of exploration and extraction have increased. Likely there’s a combination of many factors that have resulted in the increase. Three years later it’s unlikely that prices will return to their historic average, and certainly there's no policy efforts from the U.S. Government addressing the issue.

Crude oil is the commodity that fuels the planet. It is not only used in various forms for energy and gasoline, it is the core component of synthetic materials such as plastic. The global economy has been structured around oil.

High crude prices mean high transportation costs. That impacts not only errands around town, but virtually every product and service. Bought a new shirt or blouse? Most likely it was manufactured in an inexpensive labor market like China – but it got to the store shelf via a barge and a series of trucks --- all dependent on gas. Most of us have gotten used to the “fuel surcharge” on a variety of services and goods that we buy.

The higher that fuel and transportation costs go – the economic benefits of outsourced manufacturing must be re-evaluated. There will be a tipping point where the lower wage and regulation costs outside of the U.S. are offset by increased transportation costs. Aggressive and nimble companies would be well served to look at towns and cities across America and reconsider the benefits of domestic manufacturing.

Free trade has had an extraordinary impact on the U.S. economy. Goods and services from virtually anywhere on the globe can be bought and sold in American stores. The idea is that if goods come into the U.S. and are sold from a particular country then that same country would also facilitate the sale of U.S. goods in their country – and not only do consumers around the globe benefit, but companies and countries as well. Good for one is good for all.  The concept has failed in practice.

The U.S. has held a trade deficit – where Americans buy more than sell – since the late 1960’s, and monumental increases since 1995, and hitting its worst point in 2006 of $817.3 billion.

The global financial calamity of 2007-08 has been largely blamed by the “experts” on the bursting housing bubble. There’s no doubt that those issues contributed to the meltdown. But so did the trade deficit and a tripling of oil prices.

Politicians promise to fix things. A simple and effective solution would be to reinstate some tariffs on goods made outside of the U.S. Tariffs have been around forever, and officially part of the U.S. economy since 1792 when it was 15.1%.  The fee hit a high of 44% in 1870. Since World War II ended the rates have been below 10%. 2011’s average tariff is at its lowest point in American history: 1.3%. Doubling of the tariff would mean $500+ billion to the U.S. treasury and restore the rate to 1995 (when the economy was pretty strong).

Increased tariffs, high oil and transportation costs would further incentive manufacturing to return to the U.S. That would mean jobs. People with jobs pay taxes and buy goods (that have to be made). People with jobs no longer require government programs, reducing government spending obligations. A 1% increase in the tariff would have an immediate, short term and long term benefit to the U.S. economy on multiple levels. Washington politicians will instead spend the fall having philosophical jousts - a crude irony when a solution is available. 

Thursday, September 22, 2011

Dumb, Dumber and Dumbest

Stupidity sells a lot of tickets to the movies. It is the basis of many fiction and non shows on television. It’s a treasured tool in the blogger arsenal. Many websites (,, exist that document the most egregious laws. In Fresno, CA it’s illegal if you’re a midget to dress like a lephercaun. (St. Patrick’s Day in Fresno must suck!)  In Bethany Missouri, it is illegal for any black men to wear skirts while driving a truck. (I guess it's OK while driving a car or a motorcycle?)

California’s Legislature is the highest paid in the country.  The state is one of the largest, so it’s not terribly surprising. What do we get for that? For 2011 the legislators convened January 3rd and recessed for the year September 9th. In between there were another 45 work days off for various holidays and recesses. It’s nearly 6 months out of the year that the legislature isn’t in session. They are considered a full-time entity though there have been attempts to convert to part-time, the most recent in 2009 that didn’t work. What would that look like – 3 months of work instead of 6?

Governor Jerry Brown has until October 9 to sign or veto bills that made it through the 2011 legislative process. One of the one’s that didn’t is SB432 which proposed requiring hotels use fitted sheets instead of flat sheets or pay significant penalties and fines.

The Unions were more successful with AB101. The “child care” act requires that babysitters join a union.

In the week since the Legislature left the Capitol 24,000 people have called the Governor encouraging him to sign AB376 – the bill that would ban the sale of shark fin in California.

In 2010 some 672 new pieces of legislation became law  while 2011 just about 192 did.  Governor Brown is considering the 600+ that passed for 2012 (which is nearly 3 per each day the Legislature was in session).

It’s easy (and perhaps a bit lazy) to make fun of legislation that protects just the fin of a shark, hotels right to choose the linen for their rooms or for teenage babysitters to remain non-union in order to help out with a neighbors toddler.

It would be convenient to conclude that the lack of intelligence is inherent in those who are in politics. There are actually lots of very smart people who are committed to serving their communities. Blame can also be placed on the legislative process. The process itself isn’t flawed, it’s been around for centuries. The dependence on special interest money impacts laws that are proposed and signed. There is a lot of truth that when legislators need to be in a constant campaign funding mode that those with the cash have influence.

The money problem is easily fixed. I’ve opined previously and still think it's the best solution: Simply the regulations so that anybody who is eligible to vote in a particular election can contribute however much they want to a candidate (allowing for reasonable verification that a babysitter isn’t giving beyond their means). Political representation would change instantly because people couldn’t contribute to candidates or issues outside of their districts and candidates would have to interact one-on-one with people for votes and funding. It would immediately re-democratize the process.

Arrogance, however, trumps the influence of money. Legislators, by the very nature of their role, believe that most problems can be solved by making law. Shark fin soup is a Chinese delicacy that is served at traditional events like weddings. 73 million sharks are killed each year. Is a law in only one state the best way to remedy the real impact on the shark population? Biology Letters did a census and found there are 219 Great White Sharks off of the California Coast. Why not educate people about ths issue? Or a tariff? Or some other solution that doesn’t criminalize fisherman?
Lawmakers are influenced by those whom they spend the most time with: unions and corporations because they have the resources that fund the campaigns. They also have the research staffs to provide data to short-staffed legislative offices. Politicians then propose laws to accommodate issues that are raised not out of a corrupt backroom deal, but out of an arrogance of believing that government can and should solve every problem. The result is trying to unionize teenagers. The real stupidity is that those lawmakers will be re-elected. The voters who do that that are the dumbest of all.

Thursday, September 15, 2011

Original repeats

It’s the most exciting time of the year! The new television season kicks off next week. As a kid I would collect each year’s TV Guide Fall Preview Issue. As an adult the DVR is programmed and I’ll sample most of the new shows and get caught up with old favorites. Today’s media environment allows for year-round programming, so some of the anticipation is reduced since viewers haven’t been abandoned for months as in decades past.

One of this year’s most promoted shows is a fresh take on the 1970’s runway hit “Charlie’s Angels.” The current version promises more action and complex crime fighting than the original. It may prove to be the perfect escapist quasi-procedural that satisfies the masses. More than likely it’ll wind up like last year’s resurrection: “Hawaii 5-0.” “5-0” is eminently watchable, highly produced and totally tedious because it was built on the concept of a show rather than the characters and storylines. It may be new, but it feels old and tiresome. This new season will have plenty of originals shows that we’ve seen before too.

It applies to politics as well. President Obama is doing his own version of an original repeat. His speech to a joint-session of Congress last week laid out his American Jobs Act.  With 25 million Americans out of work, millions of others barely holding on to their jobs, it is the number one issue facing the electorate. It has been for three years, it’s just now getting the kind of attention it deserved.

The cornerstone of the proposed Act is changes to the payroll tax. There are lots of different taxes that individuals and their employers pay, so it’s important to be clear about which tax is going to be cut. Each employee has 6.2% of their paycheck withheld for “FICA” (Federal Insurance Contributions Act) which is government-speak for Social Security. The company you work for also pays the same 6.2% as a match. Social Security is supposed to then hold onto those dollars and allocate them back to the employee in benefit payments upon their retirement. Last month on the anniversary of the signing of the Act I examined how Social Security is not a spending plan but instead is a trust fund and that has been used like a piggy bank.

In December 2010 as part of President Obama’s deal with Republicans that extended some higher end tax cuts (known as the “Bush Tax Cuts”) a reduction to FICA of 2% was put into effect for 2011. Instead of having 6.2% withheld, it’s just been 4.2%. The idea is that if every American was receiving more cash in their paycheck, then they’ll spend it. And with more spending, then more products would need to be made, and thus more jobs created. The annual growth rate, consumer spending and the unemployment rate have not materially changed in since these policies were put into place. The $25 per week increase that average workers have seen hasn’t much changed spending habits.

For 2012 President Obama wants to extend the reduction for another year – providing each working American the $25 per week that they’ve grown accustomed to. In addition the American Jobs Act proposes cutting the 6.2% that employers pay into the fund on behalf of employees to 3.1% for the first $5 million payroll dollars. Any new worker hired for a new position would be exempt from employer portion of FICA up to $50 million. This incentive is geared towards encouraging employers to create new jobs.

The proposals reflect a fundamental misunderstanding of why employers hire. Employers hire new employees because their business requires it. A restaurant hires more cooks, wait staff and cleaners when more customers justify it. They don’t hire to save on payroll taxes.

More problematic, however, is that the Democrats and Republicans appear to be ready to compromise on some version of these payroll tax cuts. These taxes supply the cash to the Social Security Trust Fund that has been raided to help offset government spending. Further depriving the Trust Fund of dollars without any adjustment to the benefit structure puts the program at risk faster than its needs to be. It’s a classic example of short-sightedness. In this case it’s partial blindness.

Presidential aspirant Rick Perry referred to Social Security as a “Ponzi Scheme” that won’t be around. Philosophically whether the Government should be providing its citizens with retirement funds is a debate worthy issue, but the reality is that Social Security will be around forever and fighting the fight from the 1930’s isn’t a way towards resolution of finding jobs today. It’s time to shore up the program. That doesn’t happen by taking away its cash flow! Working Americans – would you prefer $25 per week today and have your retirement age increase by years … or do you want to keep the rate what it has been for 30 years and keep the benefits as stable as possible?

I applaud the President for trying to do something. After 32 months I’m rather anxious to get to work myself. Maybe it’s time to re-do the resume to highlight that I’m a tax benefit to potential employers? That’d be a great bit for a tv show. 

Thursday, September 8, 2011

9/11 Nostalgia

The attacks of September 11, 2001 are etched in our memories. As the world marks a decade since that fateful morning, media outlets overflow with remembrances. Documentaries chronicle the intervening years from nearly every point of view. Months after the attacks my production company tried to put “Created Equal?” together, but it never happened. The treatment is eerie in how relevant the issues remain 10 years later.

The tragic events of 9-11 were a wakeup call for the world. We were forced to acknowledge our vulnerability; and we shared our pain. We mourned together for those lost; and we longed for the sense of security and unity that we once felt as a nation and a world. Despite our race, gender, sexual orientation, age, or socio-economic status, we all share the impact of 9-11.

It is in this moment of unity that an opportunity exists to highlight the inequalities that gay Americans face daily, in our nation. Acclaimed and award winning filmmakers will tell the stories of the gay and lesbian Americans who were affected by this tragedy in their own words and their own actions:  
  • A gay priest in New York dies while giving last rites to the victims of the tragedy. The Pope accepts his firemen’s helmet and “fast tracks” him towards saint-hood, yet his church still officially condemns him.
  • A male couple with a young son die when their plane crashes into the World Trade Center, yet in many states, it is illegal for them to marry or to adopt the child.
  • A young gay man dies helping to thwart the hijacking of a plane bound for the White House, yet his partner remains with no right to inheritance, and no legal recourse.
  • A young lesbian woman dies leaving a partner of 13 years and two children, yet they have no legal right to the woman’s remains or other benefits.
  • Governor Pitaki (R-NY) extended state benefits to victims of the World Trade Center while Governor Jim Gilmore (R-VA) refuses to extend the benefits to the partner of a woman who perished at the Pentagon.
  • The American Red Cross continues to turn away gay men who want to donate blood (unless they have not had sex in 24 years). Citing the need to protect the blood supply The Red Cross accepts blood donations from drug addicts and prostitutes.
  • Immediately following 9-11, President Bush suspended all discharges from the military, including those resulting from the “don’t ask, don’t tell” policy. Gay and lesbian Americans are good enough to fight in a war in time of crisis, but not in time of peace.

My 9/11 nostalgia isn’t rooted in the lost opportunity of telling those (and other) powerful stories. The days immediately after the attacks the country, and indeed the world, united. At the National Day of Prayer President George W. Bush (#43) said: “Americans showed a deep commitment to one another, and an abiding love for our country. Today, we feel what Franklin Roosevelt called the warm courage of national unity. This is a unity of every faith, and every background. … Our unity is a kinship of grief, and a steadfast resolve to prevail against our enemies. And this unity against terror is now extending across the world.“

For the next three weeks, President Bush was remarkable. He was eloquent. He counseled that Islam and Muslims are not to be feared. He urged patience for those who were itching to bomb something. We now know that war strategies were at fever pitch behind the scenes and what has become known as Top Secret America was born. But for a moment, this public three week window gave a glimpse as to what kind of nation we could be.

President Bush’s calming of the nation took away the understandable emotional vengeance that permeated the culture. It resulted in near unanimity of personal support for his leadership and affection and admiration for the country from around the globe. He could have led the nation and the world to a different response. The unconventional attacks warranted an equally unexpected response. Had the perpetrators been caught, tried and jailed then trillions of dollars, tens of thousands of dead and the moral decline that America experienced would have instead been a demonstration of how Jeffersonian Democracy works.

History repeats itself. One attack leads to a responsive attack and so on and so on and so on. We can trace assertive violence back to the beginning of mankind. President Bush broke the cycle. From September 12 to October 06, 2001 the guiding principal was patience and nonviolent responses. There was an opportunity to change the predictable reaction. George W. Bush’s devout beliefs would have given him political cover if he needed it. It was not to be.

The wars in Afghanistan and Iraq have resulted in twice as many U.S. deaths than the attacks themselves. Protection in the name of terrorism has bankrupted the U.S. treasury. The Constitution was diminished with the passing of the Patriot Act. The once sacrosanct concept of “innocent until proven guilty” has been replaced with “if you don’t have anything to hide…” The largest federal bureaucracy in history was created: Homeland Security which prior to the attacks was a term used only by George Orwell in his prophetic book 1984. Fear and revenge permeate the American psyche.

On the decennial of the attacks it is incumbent to remember those who died and honor and give thanks for the bravery and heroism of so many. We must also mourn that lost opportunity and continue to aspire to be the nation we profess to be.

Thursday, September 1, 2011

Labor Day ignores 25 million Americans

Labor Day is this weekend. For most it marks the end of summer, though that officially doesn’t happen until September 23. Fashion experts have proclaimed white is deriguer until Memorial Day. The holiday became a national observance in 1894 when President Cleveland signed Congress’s unanimous legislation at the end of the violent Pullman Strike. Parades, celebrations and political rallies are traditions in many U.S. communities. Missing from all of the festivities are the 25 million Americans who are out of work.

Unemployment statistics are notoriously inaccurate. The methodology changes regularly – with the Bureau of Labor Statistics publishing a 19-page guide  detailing the history and changes in calculation processes. The Federal Government currently tracks unemployment based on those who are eligible for benefits rather than on whether somebody is working or not. The maximum number of weeks an individual may receive benefits depends by state with the longest being 99 weeks. At the 100th week even if you don’t have a job the Bureau of Labor Statistics no longer considers you unemployed…they don’t consider you at all. Contributing to the murky nature of the rate are people who are underemployed (working part-time but want to work full-time).

The “real” unemployment rate is reported to be 25.1 million, or 16.2% based on a determination of people who are eligible to work but aren’t.

Big, generic figures are hard to personally identify with. The national debt, for example, of nearly $15 trillion is difficult to understand due to its enormity. Tell 300 million Americans that each must contribute $50,000 to pay it off, and it’s easier to grasp.

My personal tangible statistics: 32 months (2 years, 8 months) without a paycheck, nearly 1,000 job applications, 6 phone interviews, 1 in person interview and 0 job offers. Others have applied to more positions with similar results. I dropped off of the unemployment rolls ages ago, so the Government doesn’t consider me unemployed.

Theories abound as to the reasons. I’m overqualified. I’m under qualified. I don’t have enough of an academic pedigree. I have too much experience for the position. I don't have enough of the right kind of experience.  The positions applied for don’t really exist as they’re just listed for legal reasons to cover the person who was moved internally into the job. I’ve been out of work too long so there’s something wrong with me. The truth lies somewhere in a mash-up of those and other reasons. 

With so many people seeking few positions, employers are in the enviable position of choice. There’s a powerful scene in the powerful film “The Company Men” where Ben Affleck’s character is interviewing for a position that pays half his prior salary and would require him to move his family away from their life-long community. “I’m a highly qualified candidate,” the character says to the hiring agent who eats her lunch during the interview. Her reply: “I have 70 highly qualified candidates.”

If an employer feels that for a particular position they need a person with specific experiences, designated degrees and skills – they can actually find somebody to fill all of the boxes. Technology supports the search process by eliminating any application that doesn’t immediately fill in each box. Gone from the equation is risk, opportunity and the human component. In today’s litigious environment, that makes sense. The result over time will be a loss of innovation, vision and entrepreneurship.

I’ve been the employer. Few things are more fulfilling than hiring new staff which is a tangible manifestation of a growing and successful enterprise. Of course companies want to operate efficiently and profitably. Labor costs are high. Any well run business delights in hiring because their financial model proves that hiring and growing equates to more income and more profit.

Why aren’t companies hiring? Blame can be spread widely. Regulations cost each consumer $15,000 per year. Corporate greed and a fanatic commitment to shareholders play a part. Republicans and Democrats are in the midst of epic warfare in a now continual election cycle. The media report on political strategy as if it was policy. The horse race mentality makes for engaging coverage but is bad governance. Confidence in institutions is low. Everyday Americans are not engaged in the political process: they are overwhelmed with making ends meet, putting food on the table and raising the next generation. A minority of eligible voters actually determine elections.

Former Democratic Presidential candidate John Edwards was right about one thing: there are Two Americas. Rhetorically the political parties favor vastly different solutions. Republicans claim to want a "return" to the Laissez Faire policies where the marketplace sorts everything out and Democrats claim to want a strong role for the state to help those who are in most need. Their actual shared policies, however, provide for a hybrid that has resulted in stagnation and the worst economy in nearly a century.

President Clinton resonated with Americans in 1992 with his Hollywood produced campaign film “The Man from Hope.” He effectively wrapped his birthplace around a campaign built on promise and hope. And then he delivered economic results. President Obama branded himself and his followers with the mantra “Yes We Can.” We’re still waiting. Regardless of political belief, 25 million of us want to believe. We want to work. We want to contribute. We want Labor Day to once again be relevant in our lives.