Tag Archives: Washington DC

October Surprise

While most of the speculation about an October surprise has revolved around the probability of an Israeli attack on Iran’s nuclear capability, or a financial collapse in Spain or Italy that drags the Eurozone to the depths, it could be that we already know the October surprise but are either ignoring it or hoping, against hope, that it is not true.

We got a surprise this week with the announcement that JPMorgan Chase lost $ 2 billion in a risk management strategy gone bad.  We saw oil prices decline on news of lower than expected economic growth in China, the defeat of President Sarkozy in French elections, and similar results in Greek elections further undermining confidence in the Eurozone.  But this is May not October.

What is our October Surprise?  

The realization that the US is back in recession.  That now seems the most likely scenario for the US economy given the anemic pace of US GDP growth, persistently high unemployment, a declining work force shrinking because more people quit looking for work and thus are no longer counted and continued polls telling us Americans think the country is going in the wrong direction.

But don’t take my word for it.  The Economic Cycle Research Institute (ECRI) a New York City-based independent economic research think tank said May 9, 2012 that year-over-year growth in US real personal income has been lower for the last three months than it was at the beginning of each of the last ten recessions. The ECRI has correctly predicted three of the last three recessions.  In September 2011 the ECRI said it saw this pattern emerging and now it is reaffirming its analysis telling us that “this is what personal income growth typically looks like early in a recession”.

Some would argue the US feels like we have been in recession or worse since 2008, but data tells us we came out of recession in mid-2009 but our deficit spending levels, fiscal and monetary policy has not produced the kind of robust recovery previously seen.  So it is tough to see how digging our fiscal hole deeper with more deficit spending will change things now.

We could tax the rich—if we can find them.  California is the poster child —or basket case for that strategy with a deficit now looming to $16 billion from $9 billion at the beginning of the year.  California is not only bleeding red ink, it is bleeding people.  From 2000 to 2009 California lost a net 1.5 million resident to other states. Only New York lost more—1.6 million residents. Think about that— 1.5 million people is a city the size of San Diego voting with their feet. Yet,  on the June primary ballot is a new tax increase on cigarettes and on the November ballot we face the prospect of two dueling income and sales tax increase measures.

So the October surprise is that it may all hit the fan starting in October as voters realize not only is our economy back in recession but that we are staring in the face the prospects of a tsunami of new taxes at the beginning of 2013 from the end of the Bush tax cuts, the end of the payroll tax cuts,  the prospects of higher taxes on both the Federal and State levels.  Meanwhile it will be obvious to every voter that our current policies are not working.

This is not what President Obama and Governor Jerry Brown want to hear, but it is the reality we all face.  The challenge for the President and Governor of California is to define a message and a policy that is something other than more of the same—because that is going to be a tough sell.

The challenge for Republicans now is to present the country with a policy vision they think will work better.  Being opposed to everything President Obama is doing is not sufficient and will not overcome our belief that both parties are guilt of the same sins.

They both spend too much of other people’s money and pander to the pet causes of their base.  They all lack ‘day jobs’ that force them to live with the laws, policies and regulations they impose on the rest of us.  They forget whom they were elected to serve and the longer they are in Washington the more disconnected they become from Main Street.  These are the manifest symptoms of confidence lost.

Senator Richard Lugar lost his first primary election challenge in more than 36 years in the US Senate from Indiana to a Tea Party activist this past week.  The Democrats said this was the ugliness of the Tea Party cleansing the GOP of moderates. But one of the reasons Lugar was defeated was the realization by Indiana voters that Senator Lugar sold his house in Indiana years ago taking up permanent residence in Washington DC and has not truly been a Hoosier for quite some time.

Sea Level Rise and Sustainability

Do you feel lucky?  New York Mayor Michael Bloomberg apparently does not.  He sent one of his Long Term Planning and Sustainability staff members to a hearing before the US Senate Energy and Natural Resources committee in Washington DC on April 19th to testify on New York City’s concerns about the impact of rising sea levels.  The NYC witness Adam Freed, told the Committee that the mayor wanted the Federal Emergency Management Agency to develop detailed flood projection maps to help New York prepare for the impacts of sea level rise on infrastructure and real estate properties in the next century.

Another witness, Ben Strauss, chief operating officer and director of the program on sea level rise at Climate Central, told the committee that sea levels in the United States will rise between one and eight inches by 2030 and between four and 19 inches by 2050. But while Mayor Bloomberg’s staff member was sent to worry out loud in a politically correct way about rising sea levels, the Climate Central witness wanted action on a four-step federal program to reduce risk and vulnerability:

  1. Protect existing beaches that help prevent the impacts of storm surge,
  2. Build artificial defenses where appropriate;
  3. Halt construction in high risk areas; and
  4. Develop a planned retreat from areas that cannot be effectively protected.

With trillions of dollars of Federal debt looming and deficits as far as the eye can see, what do you assess is the probability that the Government will spent your money entertaining strategies like this?  I know—that’s what worries me too!  If we can fund bridges to nowhere imagine how much Congress might spend to keep Broadway from turning into Venice.

Then again, think of the charm New York would have if the streets of Manhattan were all turned into canals with yellow hybrid water taxis wisking you from downtown to midtown.  Bike lanes could turn into kayak channels and since the subways would all be flooded we could build giant moving sidewalks to connect the building above the projected high water line powered by wave action turbines used to squirt sea water through the subway tunnels under pressure.

Deutsch: Blick auf das Empire State Building v...

Deutsch: Blick auf das Empire State Building vom Top of the Rock English: Empire State Building as seen from Top of the Rock (Photo credit: Wikipedia)

The torch on the Statue of Liberty can be replaced with a wind turbine and solar panels can be mounted on all rooftops oriented toward the Empire State Building which can be converted into a concentrated solar power tower with giant tanks of molten salt in the underwater floors to create a combined heat and power microgrid to power the city.

Think of it—auto emissions would be a thing of the past.  We would not need RGGI or EPA regulations or the New York Office of Long Term Planning and Sustainability.

Maybe this isn’t such a bad idea after all—by all mean prepare the maps.  And make sure you hire the same climate scientists who cooked the books to get more research grants because Al Gore told them the climate science was incontrovertible.  Let’s see where did I put that hockey stick formula again?

Mr. President: Prepare Three Envelopes!

Official presidential portrait of Barack Obama...

Image via Wikipedia

The Hits Just Keep Coming for President Obama.

There must be times when President Obama must wonder “what was I thinking”!  The piling on of bad news just keeps digging the economic hole President Obama must climb out of before it is time for voters to mark that ballot in November 2012.

Even God seems a little grumpy these days sending an earthquake and then a hurricane through Washington DC .  Who could blame him after this list of body blows:

Holy Gallup Polls!

  • Net Zero Jobs ‘Created or Saved’ in August. There were zero net nonfarm payroll jobs created in August with 58,000 fewer net jobs created during July and June.
  • Solyndra Goes Dark.  Solar energy darling Solyndra visited by the president last year and granted a $535 million US DOE loan guarantee filed for bankruptcy, shut down its Fremont, California plant visited by the President and laid off its 1, 100 workers.
  • Emissions reporting—Not on My Watch! In addition on August 19 US EPA postponed for four years the controversial greenhouse gas emissions reporting rules that require emitters to release internal data about their operations to the public. Industry groups squealed loudly about the costs and opposed sensitive information to competitors.
  • The Tea Party Strikes Back—Well in the House at Least. In an Aug. 30 letter to Speaker of the House John Boehner, President Barack Obama said his administration is considering seven proposed regulations that would have an estimated cost to the nation’s economy in excess of $1 billion each.  In response, House Majority Leader Eric Cantor, R-Va., proposed a legislative agenda to repeal the 10 “most harmful job-destroying regulations” includes several proposals affecting coal-fired power plants the Administration is trying to save for the next term by withdrawing them.
  • Show Me the Money!!! September 30 is the end of the Federal fiscal Year and while the House passed its budget the Senate has not so a new spending battle looms over appropriations or continuing resolutions for the Transportation Department, FAA extension and other spending.
  • Consumer Spending Increased but Only Because We ate Savings. Personal spending increased 0.8% in July from June but annualized 3-month moving average of real consumer spending held at July’s low 0.4 percent pace as energy prices rebounded. But to get even this small increase in real spending, consumers had to eat savings since personal savings rates fell to 5.0 percent from 5.5 percent, as real disposable income fell 0.1 percent from July.
  • Consumer Confidence Tanks.  Consumer confidence plunged 14.7 points in August to 44.5. The drop in the index was the largest since October 2008 in the aftermath of the Lehman Brothers collapse and the main wave of the financial crisis. Uncertainty surrounding the debt-ceiling agreement, S&P downgrade and volatile stock market performance caused consumer confidence to fall.

Prepare Three Envelopes

You remember that old joke, don’t you?  The new guy finds three envelopes in his desk the day he starts his new job.  The instructions say: open them in the number ordered when you get in trouble.

Envelop # 1: Blame your predecessor!  Ok that didn’t work and after three years no one believes it any more!

Envelope #2:  Re-organize.  OK, Mr President you had a chance with the Deficit Reduction Commission report prescribing all manner of bad medicine.  It seemed awful at the time so you rejected its recommendations.  Maybe it’s time to call them back for a do-over.  Your economics team except for Treasury Secretary Geithner are all gone but it didn’t help.  Defense Secretary Gates “retired” but everyone thought he did a great job so leaving does not help you, Mr. Obama.  EPA Administrator Lisa Jackson’s proposed regulations are hammering you and you keep withdrawing them but your base still likes them so firing her is only half a loaf.  If you fire Hilary Clinton she might run against you again.

There is only one thing left to do Mr President.

Envelope # 3: Prepare Three Envelopes and leave them in the top drawer of the desk!  Besides retiring now will get you lifetime health care with no death panel and a nice pension.

Then you can tell your critics to sit on it and twirl!  The Republicans will be nonplussed since none of their candidates have a chance unless they can run against you.  Your party will have a food fight over replacing you—it is such poetic justice!

The 14th Amendment Charade—or is it?

The holders of the United States national debt...

Who Holds the US National Debt via Wikipedia

Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.”

As Democrats and Republicans posture about what to do about the US debt ceiling cap expected to be reached August 2, 2011, a new “theory” floated in the media is provoking more debate that the issue on the table.  That theory is that we really don’t need Congressional action to increase the debt ceiling since the 14th Amendment says the public debt “shall not be questioned” therefore the President acting alone can order the Treasury to keep on spending.


Since the Republicans see the debt ceiling as the Washington DC version of crossing the Rubicon over deficit spending and the nation’s credit rating, this theory is causing outrage.  The Democrats are lobbing smoke bombs at Republicans threatening a Constitutional crisis if they don’t get their way.  Only this is not just Congressional Democrats doing the talking it is President Obama tweeting for the media and letting his Administration leak stories about this 14th Amendment end-run.

Meanwhile, both sides are, publicly at least, diverted from solving the problem while they score points to weaken the other side.  We hope, of course, that behind the scenes real discussion is going on about a compromise that serves the national interest.  But we have been tricked before by partisan bickering.

But there is something constitutionally scarier than maxing out our national credit card and facing the dreaded rate penalty consequences.  What is more scary is that our elected officials including our President are so cavalier in twisting and abusing the plain language of the US Constitution to play gotcha in a political brinksmanship ahead of the election. This is something we expect— from President Hugo Chavez or the Russian Duma.

Let’s hope that all this posturing is the lead-up to a compromise that protects the national credit rating, allows paying the national bills on time at reasonable interest rates, and reins in spending enough to change the slope of the deficit curve.  That would be progress.

Beyond that a deal that includes closing tax code loopholes and reducing both the gaming and cost of a tax system so larded with special interest favors that it results in more than 40% of Americans at the lower end of the income scale and many of our largest corporations at the upper end paying nothing while the rest of us get hit with the alternative minimum tax (AMT) GOTCHA to make up the difference.

But let’s face it, the reason our tax code is in such a mess is that ‘messing with the tax code’ is the best way Congress has of accumulating campaign contributions from those seeking advantage or those seeking to avoid tax pain. And the louder the controversy the more money is pouring into Congressional and political party coffers on both sides of the aisle.

The class warfare language and soak the rich evasion are gimmicks used by both sides to keep their base energized, but for the rest of America it just does not cut it anymore.  While we do NOT believe raising taxes is this weak economy makes any sense at all, we recognize the tax codes offers a target rich opportunity to close loopholes and simplify the tax process, enabling companies to bring profits home and spend them here without having much of it confiscated by a corporate tax system that is no longer serving our strategic interests.

For the Democrats this 14th Amendment charade risks turning a lot more Americans into TEA party movement members.  For Republicans, there is a fine line between sticking to your principles about not raising taxes and recognizing that a broken tax system offers opportunities to raise revenue while simultaneously simplifying the tax code, broadening the base of actual taxpayers, and encouraging repatriation of capital and profits to be spent at home thus raising tax revenues—don’t let the perfect be the enemy of the good.

The American public sees what is happening and we do not like it.  We have reached our ‘Network moment’—you remember the line:

“We’re mad as hell and we’re not going to take it anymore!”

The Confidence to See our Glass Half Full

Official portrait of Federal Reserve Chairman ...

Fed Chairman Ben Bernanke via Wikipedia

Why doesn’t our economy grow faster?  We know the answer.  A majority of the people surveyed routinely say they believe the country is going in the wrong direction.  Business is sitting on hoarded cash now estimated to be more than $1 trillion dollars and growing.  Individuals reduced spending and paid down debt as home values stay underwater.  Banks are no help.  After getting bailed out they are telling consumers to forget about getting loans unless you don’t need it and raising fees like airlines looking for any excuse to stick it to us.

Addressing the problems causing our current economic funk requires that our politicians take actions that are against their own political interests.  So in Washington DC we mostly hear speeches but get little action as Congress scores points against the opposing party and the President tries to deny the problem hoping it will go away until after he is re-elected.

We see our glass as half empty and thus fear sipping the water lest it run out.

There were two glimpses of sunshine among the clouds this week. Tim Pawlenty, former Governor of Minnesota and now an announced GOP candidate for president went to Iowa to give a generally upbeat pro-growth stump speech with some specific ideas for getting our economy out of the ditch.  Most of the other candidates are spending their time scoring points against President Obama rather than telling us how they would fix the mess.

Meanwhile, Fed Chairman Ben Bernanke got out of DC long enough to address the June 7th meeting of the International Monetary Conference in Atlanta.  Speeches by the Fed Chairman are usually so vague as to be meaningless.  Bernanke, however, had a few “sound bites” that summarized the current problem pretty well.  He said:

“As is often the case, the ability and willingness of households to spend will be an important determinant of the pace at which the economy expands in coming quarters. Increases in household wealth–largely reflecting gains in equity values–and lower debt burdens have also increased consumers’ willingness to spend.

On the negative side, households are facing some significant headwinds, including increases in food and energy prices, declining home values, continued tightness in some credit markets, and still-high unemployment, all of which have taken a toll on consumer confidence.”

Getting the economy growing requires seeing our glass as half full again.

When we do—then business will start spending to create jobs, consumers will start spending to buy goods and services and a rising tide will lift all boats as economic activity ripples through the economy.  Confidence is the missing ingredient in our strategy today.

What actions can be taken to restore confidence?

One good place to start would be an agreement between Democrats and Republicans on the debt ceiling.  Both sides know that there is little alternative but to raise the debt ceiling and assure bond holders that we will not default as a nation on our obligations.  The price President Obama is now paying for his hyper-partisan approach to virtually every issue is that Republicans are sweating him to extract the maximum price for doing what they know they must.

An ‘eye for an eye’ political price being demanded by Republicans has been translated into a dollar for dollar cut in spending to match the increase in the debt ceiling. That would not be a bad outcome giving both sides something to take credit for and signaling both a willingness to confront the monsters under the bed and doing so in ways that are enduring not smoke and mirrors.

The other issues affecting confidence have to do with the uncertainty of looming costs for ObamaCare, inflation, new regulations driven by the President’s political agenda, and a generally anti-business, pro-tax and spend philosophy of government that can only be solved with the cathartic 2012 election ahead.  It is a long time to wait for an answer to the question, but whether we see our glass as half-empty or half-full makes all the difference in how fast our economy gets back on track.

Crowdsourcing is Changing America’s Political Future

The American political landscape is being redefined right before our eyes by the Internet and the lessons its use has taught us about how to quickly find information we need and act on it.  Social networks like Facebook and Twitter have redefined how we connect with each other and keep track of fast moving events in our lives.

Crowdsourcing will end up being the phenomenon of the 2010 Election and those that follow brought about by the growth in size and influence of a leaderless group of people who share common concerns and want to do something about it.  It has enabled and empowered a leaderless TEA Party movement to redefine the issues of the campaign and force both parties to pay attention to our citizen “pain points.”

Crowdsourcing was first coined used by Jeff Howe in a June 2006 Wired magazine article “The Rise of Crowdsourcing“. Howe said that technological advances had driven down the price of consumer electronics so that the gap between the technologies we use at work professionals is no longer prohibitive for use of the same technology at home. In fact, since he wrote that in 2006 the fast rise of mobile web access with smart phones and other devices means individual users may actually be the early adopters well before corporate IT permits such things as iPhones or build the business apps for iPads.   Howe described a marketplace of ideas where companies could take advantage of the talent of the public, and said that “It’s not outsourcing; it’s crowdsourcing.”

Fast forward to 2010 when the TEA Party movement exploded on the stage the Democrats referred to it as a rebellion inside the Republican Party.  But that was only partly correct.  It was a rebellion but it is affecting both parties and changing everything from the alliances in Congress on key issues to the shape of the election issues to the strategies used by candidates, lobbyists and the political consultants who thought they knew how to run campaigns—until now.

While the Democrats mocked her Governor Sarah Pail tweeted them back with a speed and razor sharp retorts that cut to the bone many of the traditional political concepts.  The success of TEA Party movement candidates is not caused solely by the crowdsourcing power of the TEA Party itself but by the speed with which crowdsourcing itself has been used to refine and hone the message to bring along many other people who share the same fears, angst and aspirations.  It did not take Gallup Polls to get the message right, it only took about 24 hours of tweets.

Now the Democrats have ‘beat cheeks’ out of Washington DC as if they feel burned by its proximity and think running for cover back to their districts will let them get away with their traditional campaign strategy when things are going bad with their message—negative advertising.  Only this time the tweets of fact checkers and the crowdsourced judgment of constituents produces a raucous turnout at campaign events and town hall meetings ready to give incumbent of both parties a rough time.

Crowdsourcing is the worst of both worlds for politicians. At one in the same time it nationalizes the election by galvanizing the crowd around their common concerns about the “big issues” such as Federal spending, deficits, ObamaCare, unemployment, rising taxes and other consequences of the progressive agenda the Democrats have pursued.  At the same time, crowdsourcing makes all politics local as never before galvanizing the home town crowd to turn out to speak out.

Republicans thought they could just blame all the problems of the country on Democrats and that would be enough to win.  Democrats thought they could blame Republicans for having no new ideas as if that absolved them of their sins of overreach.  Crowdsourcing has delivered the “pox on both your houses” message to both parties.

Thomas Jefferson would love this rebellion at work today among the crowd.

But the real challenge may not be winning the 2010 election for new faces with new ideas.  The challenge is going to be governing and using the same crowdsourcing tools that make it easy to blow the whistle on a political miscreant to instead search for a common ground solution that brings people together around consensus for changes we can really believe in that will turn the country around while there is still time to fix it.