Morning Fog

Corporate Bonuses and Perks

Is there really any need to say anything more about you corporations that got those big handouts from the government (well, they DO seem big to taxpayers) and then paid those immense bonuses to your rainmakers?  Apparently, there is. 

Well, corpo-guys, it's probably not your fault.  Your Uncle George spoiled you terribly over the past eight years, giving you everything you asked for and then some, so you got used to Fairy Tale Land.  Here's a quick little primer to help you readjust to the real world. 

Lesson 1:  Personally, I'm not one of those people who think the government should get too far into telling you how to run the business...but there are plenty who do, so it would be smart to avoid giving them motivation to do so.

Lesson 2:  Don't try to claim that you don't use "taxpayer dollars" for the bonuses and the airplanes.  People aren't that stupid - they know money is fungible - and if you don't, then you ought not to be getting even a salary, let alone a bonus.

Lesson 3:  In the real world, people still have the quaint notion that a bonus or incentive is  paid for actually achieving something.  It's silly, I know, but there you are.  Oh, and it's supposed to be something positive, so that thing your top management team did this year -- where they took needless risks, failed to see developing trends, and bankrupted your company -- that really doesn't count, I'm afraid (go figure!).  So maybe just this once, skip those bonuses.  You'll have to find some other time, some other way to keep those valuable high-performers - and a way to explain to the outside world why you would want to.

Disappearing Markets II - Postal Service

In times like these, many businesses are finding the need to cut back.  Often the recession highlights problems in markets that were already weak but perhaps had not fully adjusted to that fact.  One such case is the auto industry (see "Fueling Up for the 21st Century" ).  Another is the U.S. Postal Service (USPS).  

I'm one customer who thinks the "post office" has done a darned good job in many respects; it has modernized and innovated; it has made personnel and building cutbacks; it has developed a lot of online services; delivery generally is pretty quick for first-class and priority mail; and it has managed to hang on to a good share of the parcel market.  All this, while still having to run those thousands of post office locations and to deal with the little old lady who needs to send a package but will have to have the clerk explain the rates and maybe even help her get it wrapped.  That's the charm of the post office; it works well for individuals, and it's still usually the best service for home delivery.  (Test: Can you have Fedex hold your mail when you're away? Does UPS deliver on Saturdays?  If you live in Tinyville, Montana, does either of these services have an office in your town where you can mail something? No, no, and no.)

On the other hand, the USPS has always had trouble making ends meet.  It operates under some serious constraints imposed by Congress, and in addition, it has been losing volume for years, thanks to newer technologies like e-mail, on-line banking, and web-based publishing of periodicals. 

So it's not surprising that on January 28 the USPS again forecast operating deficits, and even requested contingency permission to cut deliveries to five days a week.   The next day, however, Rep. José Serrano, Chairman of the House Appropriations Subcommittee on Financial Services and General Government, said that he will block any effort to cut services because people "depend" on daily (six-day) delivery.  I wonder if he's correct.  It may be time to reconsider what is really essential in postal service. 

There seem to be two sacred cows regarding mail delivery: universality (keep community post offices open everywhere) and frequency (six-day service). But do we need both?  Of the two, I think universality is more important.  Like Rep. Serrano, I would prefer six-day delivery, but I confess I was neither shocked nor outraged to hear a five-day week suggested.  People are already out of the habit of depending on "snail mail."  In an informal online survey by a local weekday newspaper, respondents said by a 2-to-1 margin that they wouldn't much care if mail went to a five-day delivery schedule.  

No doubt the USPS could find a few more efficiencies in its current operations, but beyond that, they'll clearly need a bigger step to make a dent in the shortfall.  So I would find five-day delivery acceptable, with caveats: its effects on USPS competitiveness should be carefully considered; the non-delivery days should not be consecutive; and counter service should remain available six days a week.

Keeping It Realistic in Afghanistan

President Obama is off to a quick start on his domestic agenda but he has been a bit slower (at least in public) to specify how the foreign policy and national security agenda may shape up. 

One of the first indications was Secretary of Defense Gates's statement to the Senate Armed Services Committee January 27.  Gates reportedly indicated that the shift of some troops from Iraq to Afghanistan would be possible somewhat sooner than expected, while cautioning that our goals must be realistic and limited. 

I hope this means that we will keep Afghanistan from becoming another Iraq for us, and that we will focus purely on security objectives, seeking to prevent the country from becoming again a haven for terrorists.  That is job one, and it's job enough for our seriously stretched armed forces.  (On this subject, I highly recommend the complementary and elegantly written view expressed by Octogenarian .) 

In any event, it seems that the Taliban and Al-Qaeda have already anticipated Obama's sharpened focus on Afghanistan by increasingly shifting operations into neighboring Pakistan.  This is a serious development, but it reinforces the idea that our goals in Afghanistan should remain limited, and it ought to make it easier for us to keep our force at approximately the same soon-to-be-augmented levels.

Short Takes - Media Notes

Thumbs Up

Sen. John McCain - For raising conflict-of-interest issues regarding the appointment of former Raytheon lobbyist William J. Lynn as Deputy Secretary of Defense. It's said Lynn was holdover SecDef Gates's pick, so maybe the Obama White House felt they had to go along, but really, it doesn't play well in Peoria.  By the way, welcome back, Senator.
Net Zero - For smart marketing: Ads suggest saving money by going back to dial-up.  It makes sense for a lot of people.

Thumbs Down

Illinois Gov. Rod Blagojevich - However the current brouhaha ends, his TV appearances on the East coast while his impeachment trial is proceeding back home should put him well in the lead for the Richard J. Daley Award for Insouciance --  You don't like the way we do things in Illinois?  F... you!
CitiCorp - For not thinking that big fancy airplane could be a PR disaster (and not really caring, either).  In close competition with Rod B, above.

 

Immunization and Contagion

I recently read about several new cases of Hib (Haemophilus influenzae Type B) bacterium in Minnesota and was struck by the similarities between this situation and the problems that have been experienced in the eradication of polio (see my earlier post).  It is not yet clear whether this is a pattern that is occurring elsewhere in the U.S., or if it's unique to Minnesota.

Hib can cause fatal infections; immunization is effective against it.  Minnesota health officials speculate that reluctance of parents to have children immunized may play a role (the vaccine is in somewhat short supply too).  Parental refusal has also played a role in Pakistan, India, Nigeria and other countries where new cases of polio still occur (the other obstacles to progress are war and the remoteness of some areas).  It's also been reported lately that in some areas of the U.S. and Europe - notably, those where a high percentage of parents have declined immunization - measles is cropping up again. 

In light of evidence that incomplete immunization of the population can open the door to a resurgence, the trend of parents refusing to permit their children to have immunizations disturbs me.   We've got new diseases to worry about, from HIV to ebola and BSE, but we can't afford to be complacent about the older ones.  Perhaps we take too much for granted today.  Most parents today don't recall how prevalent diseases like smallpox and polio were just fifty years ago, and how many victims they claimed. They're not much in the news any more but they could very rapidly become threats. 

I know there's some concern about side effects or future complications, but as far as I'm aware, these are mostly unsubstantiated or extremely rare (depending on the disease), while the effects of neglected immunization are well documented, and often potentially fatal. 

Universal immunization against preventable diseases is the one contagion we should want to spread.

Fueling Up For the 21st Century

Of the many changes coming out of the White House in the past week, none is more welcome or overdue than the steps announced January 26 regarding fuel standards for passenger vehicles.  Though nothing is set in stone yet, it seems probable that automakers will finally be given some serious targets for fuel economy, while states may (may!) get greater autonomy to set their own standards.

It's welcome, because movement has been far too slow.  Obama noted, in making the announcement, that it's time to end government foot-dragging, but it's really the U.S. manufacturers who for more than two decades approached greater fuel efficiency in low gear with their parking brakes on, arguing that it wasn't technologically possible, or that costs would be too high.  Instead, they took refuge in wimpy standards, a shell game with "light trucks," and protectionism.  Congress, and several administrations, were complicit in this failure of imagination, with the result that no one really tried.  

And it's overdue, because the handwriting has been on the wall for quite a while: 

• Climate: I keep an open mind about global warming generally but I do think, on the issue of the escalating levels of CO₂ in our atmosphere, the evidence is overwhelming that it's largely man-made.  No matter what is causing it, the effects are generally negative, so it's prudent to do what we can to reduce it. 

• Scarcity: Petroleum is finite; therefore its cost will continue to rise and reverberate through our economy, whether we drill our own, or import it from a friendly anti-democratic nabob. We must use less now, and find substitutes over the longer term. 

• Markets: U.S. brands' market share has dropped continuously over the past 30 years,  U.S. auto manufacturers' stock prices have declined steadily over the past decade, and sales have been bolstered by increasingly generous discounts and financing deals.  This is not solely because of fuel efficiency, but there's something wrong with the picture here, something alert businessmen should have noticed.

The Greek chorus against tighter standards is already gearing up again, with the added argument that times are tough, change should be postponed.  But times for the carmakers have been tough for a long while.  It would make little sense to devote so much national effort and treasure to rescuing an industry whose business model is so clearly flawed.  Granted, there are problems to be overcome, but couldn't we -- shouldn't we? -- wish that our current captains of industry at Chrysler, Ford, and GM (like their counterparts 80 years ago) might have the wisdom to see the need to change, the imagination to envision the possibilities, and the inspiration to seize the competitive advantage that could come from innovatively redefining themselves?  They'll be better for the effort; they may even survive because of it.

Setting and Keeping Standards

Recently, School Board officials of Fairfax County, Virginia announced that the county would switch to a revised grading method in its large school system.  Henceforth, 90 points or more on a test or assignment will earn the student an A, 80-89 a B, and so on.  In addition, the county will now provide more point credit to students who take advanced placement, international baccalaureate, or honors classes. This scoring system is evidently in use in a very large majority of the school districts in the country.

The previous Fairfax system, in which an A required a score of 94, had been in place for many years but was increasingly under attack by high school students and their parents, who argued that with other schools using a more generous scoring standard, they/their children were at a disadvantage in applying for college admissions and scholarships.  That's undoubtedly true, so it's difficult to fault the Fairfax School Board for caving in to the pressures of parents and perhaps leveling the playing field. 

The change from a 94-cutoff to a 90-cutoff seems reasonable and practical (not to mention politic!).  Why shouldn't everyone be on the same system?  

Still, it's a little sad to see a high standard in any field obliterated in favor of a lower one.  As the English playwright Alan Bennett observed through one of his characters in Forty Years On, "Standards are always out of date. That's what makes them standards."  But it's not just nostalgia.  There's a lot of talk these days about slipping standards in education, yet here we are, succumbing to education politics in assessing our students.  Defending their accession to this change, School Board officials opined that students these days are "taking tougher classes."  Sorry, I really doubt it.  I would hazard a guess that whatever it takes to achieve a 90, or 94, in 2009 is rather less than it might have required in, say, 1989 or 1969.  I wonder what percentage of students now are getting A's, as compared to those in previous generations.  

Even more dubious, in my view, is the practice of awarding extra points for taking AP or other "special" courses.  I have some experience in this line, having taken a number of such courses myself (this was back in the Middle Ages -- you know, back when we all had to walk 9 miles to school through snowstorms).  At that time, just taking an AP or Honors class was itself the "bump."  Those classes are identified as such even today; college admissions officials can easily assess them for what they are.  So what purpose can it serve to award extra points?  Very little, I suppose, except to swell the number of students who sign up for them to get the points.  If they fail, is a point deducted from their overall GPA?  (By the way...why do we use A, B, C anyway?  Why not just provide colleges the raw scores --- 98, 90, 85, 60.  Wouldn't that tell them a lot more?) 

I don't mean to castigate Fairfax officials unfairly.  Their decision is reasonable.  But it's a slippery slope.  The students who benefit today from this change will have children who will probably be getting A's for scores of 85.  Sad.

Economic Rescue, Again

More details are now available about what's being proposed for the economic rescue package currently under consideration in the House of Representatives.  (If you haven't looked at them, try the updated White House website.)  I doubt there's any American who couldn't find something to dislike in the overall plan.  Too much emphasis on this program or that, not enough goodies for one or another constituency, etc.  I understand of course that this is grist for the politicians and that partisan posturing is likely to continue for a while.  As for myself, I've already said there are elements here that philosophically don't belong in an effort whose priority is to rapidly resuscitate our economy.

On balance, though, it looks pretty good.  If everybody can grouse about one thing, the other side of the coin is that everyone should be able to find a lot that they agree with.  And that's the essence of government by consensus, isn't it? 

Which leads me to recent statements by Rep. John Boehner (R-Ohio) lamenting that the plan is "...full of government projects which won't provide immediate relief to our ailing economy."  Well, I said earlier that Speaker Pelosi and Democrats in Congress in general would need some guidance in being reasonable, but it's evident the Republican side could also benefit from some partisanship-management classes. 

Let's look at some of Boehner's specifics.  He claims the plan would spend $275,000 for every job it creates. Sounds expensive, doesn't it?  But what about the multiplier effect? -- spending creates jobs and growth; the growth creates more jobs and income.  "Cost per job" is meaningless because the spending has multiple effects beyond jobs, and beyond the jobs the Obama team says their plan will create.  I don't think Boehner or his staff are ignorant of this, so I have to credit the statement to deliberate obfuscation. 

How about the claim that the overall size of the package is too large?  Hmm...where were Boehner and his Republican cohort when their President transformed an inherited budget surplus into a $1-trillion-per-year deficit?  Then there's the complaint that the spending is not immediate; perhaps so, but when you're trying to move a whole economy, 18 months doesn't seem very long, especially in light of many predictions that the recovery may take several years.  Finally, we have the suggestion that the plan doesn't address the severe lack of credit for consumers and small businesses; I too think that's critical, but it's not something we should look for in this legislation; that's the job of the second tranche of the financial "bailout" money that was approved earlier.

So, Boehner is posturing too.  Understandably!  It's not clear the Republicans can stop, or significantly alter, the package even if they wanted to, so a sign of resistance is only natural.  But what bothers me is delay for the sake of delay.  Loyal opposition is a legitimate role, but in times of crisis people have a right to expect a constructive attitude from all their representatives.  

It's conventional political wisdom that a President usually has only about a year (the first year) of his term to get major legislation passed. Obama has effectively said, by way of this recovery proposal, that he's not going to put off his chances to get his legislative program enacted just because his predecessor had...er, "disappointments."  The proposal is a pretty wise blend of things we as a nation need to do in the short term to get out of the mess we're in, and items that are part of the platform that Obama was elected to implement. 

I'm not an economist, but since economists can't seem to agree on how to deal with our current problem, I haven't hesitated to pitch in my two-cents' worth.  If you click to continue below, you'll have my random thoughts on the pluses and minuses of the Economic Rescue Plan.  But seriously, you might prefer to look at the details for yourself on the White House website linked above. 

The Politics of Economic Recovery

Early reporting from Capitol Hill suggests President Obama's aid package for the economy may not sail through to Congressional approval immediately. 

It's too early to suggest the legislation is in serious trouble (though some media reports are doing that).  The reports do confirm, however, that if Obama is to reach out to Republicans and is serious about consensus government, he'll need to rein in some of the knee-jerk political instincts of Congressional leaders in his own party.  Pelosi is quoted as saying, "Yes, we wrote the bill; yes we won the election" but this hardly seems commensurate with the President's stated desire to reduce partisan posturing. 

Besides, the GOP leadership surely have a point when they suggest that funding for Pell grants, or the arts, is inconsistent with the legislation's priorities; they may be on shakier ground in asking for more tax relief for business (which also will not have quick effects), but those ideas might also be considered.   Both parties need to realize that they will benefit most (in voters' eyes) by acting quickly; by refraining from porkbarrel spending on unrelated pet causes; and by focusing on the priority of getting the economy moving again.  Dickering, but not bickering, will be welcome.

Obama meets today with Congressional leaders of both parties, and later with Republicans.  Compromise solutions can materialize rapidly when necessary, so I have little concern that the package will pass in some form, and without major delays.

The second real difficulty is to know what effect the legislation will have.  Economists and politicians alike disagree on what measures will work best, or soonest.  I'm uncomfortable with the sort of legislation that just throws money in several directions in the expectation that some of it may sprout a solution, but understandably, no one -- I assume especially not the President -- is likely to put all the eggs in one basket.  I do think the suggestion by Washington Post columnist Steven Pearlstein, to focus on what he calls the "shadow banking system," has a lot of merit.  After all, just a few short months ago, when the full extent of the crisis had not yet been revealed, analysts were fairly unanimous in saying that the real threat was in the disappearance of this subtier of packaged loans.  Seems like a good place to start. 

Eradicating Polio In the World

Certainly there are plenty of political developments to talk about as the Obama administration begins to define and act on its agenda, but today I'd like to mention something worthwhile that may get a little less notice:

In 1985 Rotary International, the umbrella organization of the 30,000-plus Rotary clubs all over the world, proposed a plan to eradicate the crippling disease poliomyelitis (polio) around the globe.  In a major international effort since then, involving Rotary, the World Health Organization, the Centers for Disease Control, UNICEF and recently the Bill and Melinda Gates Foundation, and funding of more than US $ 6 billion, polio has now been almost completely eliminated.  Perhaps the best illustration of this success, I suspect, is that younger people in the U.S. probably have never, or rarely, heard of the disease, don't know anyone who is affected by it, and certainly never took shots or (later) mouth-administered vaccine for it.

The key words here are almost completely eradicated, because new strains have mutated over time, new cases of the disease continue to crop up in a few countries, and by travel from these countries, the disease has been spread back to some countries that were polio-free. 

In the past, Rotary has raised a total of $825 million toward the eradication of polio, mainly from donations by individuals -- Rotarians and others -- around the world.  Now, the Rotary Foundation has pledged an additional $100 million to help complete the job.  If you'd like to find out more about this very worthwhile effort, please check out the RI Website, or if you would like to contribute directly, you can move right to the contribution page, select "Polio Plus Fund," and use your credit card to make a donation.  It's secure, and it's tax-deductible (in the U.S.).