Can someone explain this?

Here were the headlines on http://www.cnnmoney.com/ at the end of the day on Friday:

* Most jobs lost in 34 years. 11 month decline of 1.9 million

* Unemployment rate soars to 6.7%

* Foreclosures soar 76% to record 1.35 million

* Dow rises 269.13

If this were an SAT test I think I could nail the line that doesn’t belong here. I will never understand the financial markets; but then again, the professionals don’t seem to either.

Charlie Rangel is back in the news. Seems he applied for and received a “homestead” tax rebate from NY state for a house he owns, but to legally qualify the house must be one’s principal residence. But Charlie lives in three rent controlled apartments in Harlem, also in conflict with the law. Then there is he failure to pay taxes on his condo in the Dominican. It’s good to be the king. It’s been a tough year for NY Dems. In addition to Charlie’s and Governor Spitzer’s little problems, new Governor Patterson had to fire his number one aide who had failed to pay US income taxes for several years. His lawyer claimed a form of mental illness that prevents a person from paying taxes. I wish it was contagious.

Two more reasons I love magazines: Read Esquire’s article in the December issue on Dean Kamen. Inventing the Segway may be among the least impressive (and least strange) of his many accomplishments. Turning sewage into drinking water? A perpetual motion machine? No problem for Dean. No blog is ever going to provide the world with this kind of journalism.

Is there any doubt that Clint Eastwood is the coolest guy on earth? Read this mini review in Time of his acting and directing career combined with more info on the upcoming Gran Torino, which he says will be his last acting job. His timing is also impeccable as it turns out he plays a recently retired Ford assembly line worker. Pretty topical.

Why is this man smiling?

In the Senate, the leading opponent of giving aid to the domestic auto firms is the man to the left. No, it’s not Rip Torn. It’s Alabama Senator Richard Shelby. And why is he so opposed? Could it be because, according to the Alabama Automotive Manufacturers Association, the number of automotive manufacturing jobs in Alabama has increased by 80% since 2001, and the state is home to nearly 300 plants? Close to 500,000 cars were manufactured in Alabama in 2005. Mercedes-Benz, Honda, Hyundai and Toyota all have a strong presence there.

And every one of those jobs is there for two reasons: First, because there are no unions in the south; and second, because Alabama gave enormous tax abatements and other financial inducements to the manufacturers in order to lure them to Alabama. Those inducements included things like building roads and railway lines to the plant locations at no cost to the manufacturer, but at great expense to the taxpayers. Hundreds of millions of dollars were given away.

It would be a major imprudence, in Sen. Shelby’s view, to use taxpayers’ money to help Detroit, but it was no doubt a highly prudent investment in the future of Alabama to set Toyota up with some free roads in order to get the jobs.

In fairness it must be said that if Alabama had not, then Tennessee, South Carolina and Michigan too would have happily done so. It’s a buyer’s market when you are looking for a location for a few hundred jobs.

Senator Shelby would be happy to see the Big 3 go under. He’s betting that will just mean more manufacturing jobs for his state, while the taxpayers of all 50 states will bear the cost of supporting hundreds of thousands of displaced workers, and their families, in the Midwest.

Where the hell is everybody?

Here’s my own little economic survey. I flew to St. Louis Tuesday from LaGuardia on the only non-stop flight in the late afternoon, and the plane was half full. I stayed at the Ritz (corporate dictate) and they upgraded me to a junior suite and gave me a free bottle of wine with dinner. I took a client to lunch the next day at Mike Shannon’s, a classic St. Louis steak joint that’s been around for years, and they could have shut down half the dinning room and played a half court game of 5-on-5. That afternoon at the airport I was early and got a shoe-shine. The shoe-man had been at the same stand for 30 years and said he’d never seen it so dead as it had been the past few months. My flight home (again the only direct option) was less than a third full; I got all three seats in the emergency exit row to myself.

These are not good signs. I can’t even remember the last flight I was on that wasn’t completely full, and I’m not one of those road warriors who belongs to all the travel rewards clubs and knows all the tricks; these were random perks.

Another troubling sign: the most direct path between my office and Grand Central takes me through Rockefeller Plaza every morning and evening, except for the period from roughly November 15 until January 15, when the crush of tourists visiting New York makes walking through the Plaza in the evenings impossible; I have to swing north and go cross-town on 51st Street over to Madison. But not this year. I’m still cutting through the Plaza because there are far fewer tourists – especially from abroad.

So it’s not just car sales and home prices that are down big. People are staying home in droves.

The tide is turning

The tide seems to be turning a little as the media starts to realize just how badly we have all been abused by the robber barons of Wall Street. It takes a bit of a commitment to read Michael Lewis’ article (link at right) but just few minutes to read what Tom Friedman wrote today about it. These people need to be held accountable; these were not mistakes, these were premeditated acts of larceny that are now costing regular, taxpaying citizens billions.

I’ll probably take a few days off for Thanksgiving. I wish you all a happy holiday. We still have much to be thankful for. I’ll close with this quote from Lincoln’s second annual message to Congress, in December 1862:

“The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think anew, and act anew. We must disenthrall ourselves, and then we shall save our country.”

Will the real stooge please stand up

Why are the auto company CEOs getting so much grief from the press, pundits and Congress, while the Wall Street and banking CEOs are getting so little? Because the critics are gutless and self-serving. Financial organizations give out far more PAC money than the auto companies, and, being primarily New York-based, have a much cozier relationship to the media, who tend to be star-struck by the power and fabulousness of the masters-of-the-universe-types at Goldman and Citi.

But who really deserves the scorn? Running a car company is one of the most complex tasks in business. You must market and sell a very expensive consumer product to a very fickle consumer. You have to design those products for where the market will be in five years. You have highly sophisticated competitors from at least six foreign countries. You have to deal with massive numbers of employees and several very powerful unions. The products you make require the very latest in sophisticated engineering and production techniques, combined with outstanding design. The fluctuations in two very volatile commodities (oil and credit) can make or break you. Oh, and just to keep it interesting, by law, you must sell your products through 10,000 independent businesses, each run by a hoople who is sure he knows more about the car business than you do.

To be a successful banker you have to lend money at a higher interest rate than your cost of capital, look good in a suit, and be able to show the yokels a good time when they visit New York. To be fair, you must do all three of these things well. Two out of three is not good enough, as we are learning in an oh-so-painful fashion now.

Two of the three men running the Detroit auto companies have been there short times and came from other industries, and all three are struggling to overcome the big mistakes that were made over decades by their predecessors.

And yet turn on CNBC or any other news program and you will surely see some pretty face explaining in 90 seconds what Detroit needs to do to fix itself. Like they know. And of course the politicians are all shocked to discover that the auto execs make millions and don’t fly coach.

What stunning, self-righteous, hypocrisy. I never dreamed I’d be writing a post defending auto CEOs, but if they are the Three Stooges, then Lehman, AIG, Goldman and Fannie Mae were led by the Four Horsemen of the Apocalypse.

Why people are hurting

Part of the reason the current credit-crunch is hurting so many supposedly middleclass people is that after a seven year economic expansion, real household incomes have actually declined for the average American. This is very different than what usually happens during economic good times (see chart) and it makes my populist blood boil.

W. has taken care of the rich during his watch but neither he, nor any of his predecessors that I can remember, has done much for regular working people in this country. W. gave them the Medicare drug benefit, but stuck our children with the bill.

This is just one of many indicators that make me fearful for the long-term economic health of the country. We’re drowning in debt, our currency has become the peso of the early 21st Century, we don’t make anything here now except reality TV shows, celebrity blogs and designer water.
The really scary thing about all this is that I don’t think anybody really knows how the economy works. For example, has NAFTA helped or hurt the country? Well, it probably depends on whether you were a United Steel Worker or someone else.

That said, trillions of dollars of debt and deficit budgets stretching as far as the mind can imagine can’t be good for the country, and there is very little discussion of this in the daily political debates. We argue endlessly about how to cut up the pie, but spend no time at all trying to make a bigger pie.

The d’blank economic stimulation plan

President Bush wants to put a $150 billion economic stimulation package into effect to ward off a recession. The money will likely be distributed in the form of small tax rebates (under $1000) to families with incomes below a certain level. The big debate is whether most of this money will get spent, which will stimulate the economy, or be saved (as was with the last such rebate) which will do little but add to the national debt.

We have our own plan, based on the following beliefs: 1) the nation’s physical infrastructure is in disrepair, and 2) every new job created will produce significant spending – well beyond the small handouts envisioned in the Bush plan.

Here is how it would work. First of all, ours is a two year plan that uses the same $150B budget. Half the money would be set aside for equipment and materials. The remaining funds, $37.5B per year for two years, would be used to create new jobs for people who would inspect and repair bridges, highways, parks, federal and state housing developments, and other public properties.

These funds would create nearly one million new jobs paying $17 per hour plus good health care benefits. That works out to about $34,000 a year – about average for an individual U.S. income and a heck of a lot better than stocking shelves at Wal-Mart.

And it’s nearly a million new jobs – that is an average of over 18,000 jobs per state. If they are prorated by population it will mean over 100,000 jobs in California, nearly 60,000 in New York, and nearly 35,000 in Ohio. An average sized state like Tennessee would get 18,500, but even smaller states like Nebraska and Mississippi would still get enough jobs (5,300 and 8,700 respectively) to make a difference. And for two years. (If you would like to see the numbers we have a spreadsheet we can send to you.)

Instead of a hand-out, people get jobs. Instead of nothing but debt, the country gets much needed improvements. Instead of a momentary, low-rent shopping spree we get a million jobs and a boost to universal healthcare.

Which plan would you prefer – or perhaps you have one of your own?