Category Archives: Economics

You don’t see a vagus nerve response in upper class people

Maybe that explains why well-to-do Duluth doesn’t seem to mind that the fancy new schools of the Red Plan have shortchanged some children.

A lot of them would rather shut Art Johnston up with character assassination than listen to his complaints about this. If only they knew it shortchanged all Duluth Children by ten million a year. That might make them open their eyes a little wider.

Where to begin?

Not with that by now ripe and ancient and unedited series………. I know I promised to do it. It was more of a promise to myself and not to my readers so I’ll just hang that rationalization out there for you to smirk at.

Its been one of those mornings with me waking to a hundred blogable thoughts that sort of started by my thinking about the Author William Styron who, it strikes me, staved off depression by writing important work about depressing truths. I recall vividly reading the rape scene, startling to me as a Senior in High School, in his Book “The Confessions of Nat Turner.” That led me into two directions…..a fascinating series of responses to Andrew Sullivan’s Blog from women writing him anonymously about their experiences of rape and to thinking about one of Styron’s subsequent books “Sophie’s Choice.” It was an illusory choice that drove the plot and the life of the woman who made it and it.

The one place my lying awake did not take me to was any determination to pour three or four hours into proofreading old posts. So where to begin.

As it happens I was thinking about posting my Buddy’s terse question to me on the last post I wrote the one preceding this, of course. Its about economics and race. We’ve argued about both. So when I checked my email I found among the four unasked for solicitations one from Amazon with a book offer. These are usually more miss than hit because between my wife and I we got all manner of books nearly beyond any algorithm to deduce our interests. This one caught my attention however and the blurb in it sounds intriguing.

By the publisher of the prestigious Grant’s Interest Rate Observer, an account of the deep economic slump of 1920-21 that proposes, with respect to federal intervention, “less is more.” This is a free-market rejoinder to the Keynesian stimulus applied by Bush and Obama to the 2007-09 recession, in whose aftereffects, Grant asserts, the nation still toils.

James Grant tells the story of America’s last governmentally-untreated depression; relatively brief and self-correcting, it gave way to the Roaring Twenties. His book appears in the fifth year of a lackluster recovery from the overmedicated downturn of 2007-2009.

In 1920-21, Woodrow Wilson and Warren G. Harding met a deep economic slump by seeming to ignore it, implementing policies that most twenty-first century economists would call backward. Confronted with plunging prices, wages, and employment, the government balanced the budget and, through the Federal Reserve, raised interest rates. No “stimulus” was administered, and a powerful, job-filled recovery was under way by late in 1921.

In 1929, the economy once again slumped, and kept right on slumping as the Hoover administration adopted the very policies that Wilson and Harding had declined to put in place. Grant argues that well-intended federal intervention, notably the White House-led campaign to prop up industrial wages, helped to turn a bad recession into America’s worst depression. He offers the experience of the earlier depression for lessons for today and the future. This is a powerful response to the prevailing notion of how to fight recession. The enterprise system is more resilient than even its friends give it credit for being, Grant demonstrates.

My Buddy and I heatedly debated Obama and Bush’s rush to fix the Depression that began the Obama years. He was the hand’s off libertarian I was the John Maynard Keynesian big government fiscal interventionist. Still am, but I’m willing to test my theories with a good dissent. Sadly I’ll have to wait for other reviews of the book because I’m not likely to find time what with all the other unread must-reads gathering dust on my bookshelves.

As for my Buddy’s terse response to my Nightmare Economics Post. This is it:

Harry:

From http://lincolndemocrat.com/?p=12032:

Our politics today is mentally stunted. We need more minorities to wrest the economy from the old white folks who were given so many economic protections during LBJ’s Great Society that today they live well and long while one-in-five American children go to bed in need.

What the hell does that mean? Are you suggesting that only white folks who are now old were given many economic protections during LBJ’s Great Society? What evidence is there of that? If there is no evidence of that, why do you ascribe those protections to only white folks? Do you need to visit an ophthalmologist for the purpose of eliminating racial bias and bigotry from your vision?

[Your Buddy]

I had no more time to respond to this question than I did to proof old posts. Had I attempted it I might have referred to some of the histories that describe how the white south and the Congress crafted social welfare policies that left blacks out of the New Deal. But I doubt my Buddy would have been impressed. I just sent him a one word reply relating to my need to visit an ophthalmologist:

Probably.

Nightmare economics

Chocolate is good for the brain and memory. I don’t know how much that is hype but I welcomed hearing that on last night’s news. Maybe my consumption of the stuff will counteract the short night sleeps I often get when I’m trying to solve the world’s problems. Its just after 2 AM and after close to four hour’s sleep (not bad for me) I woke up agonizing about how the Republican Party has reinvigorated some long discredited notions about economics. Its made for good electioneering but that’s only if you take short term election success as your measure. This could be the last election cycle it works for the GOP in this mid term election before the old white majority of voters begins to peter out.

I won’t go into any depth…..in fact I’m out of my depth on this but I’ll put down some bullet points before retreating to proofing and editing the three recent “tenterhooks” posts that by now are already old news.

Government spending and borrowing have been doe see doeing forever. Time and again great nations have been brought to their knees by taxing themselves to death for great egos and warfare. Israel’s King Herod, Robin Hood’s King John and a great many other’s lost favor by being accused of overtaxing the nation to build Temple and other public amenities or financing great wars like the Crusades, in John’s case for his vainglorious brother Richard the Lion Hearted. And yet such public spending can take an economy and help it break from the doldrums. The North’s Civil War spending, despite the debt, pushed its economy into the stratosphere that kept up despite a couple of recessions until the Depression. FDR’s modest domestic spending during that time edged the nation away from recession but it was finally conquered by the massive military spending unleashed by Pearl Harbor. Hitler had taken Germany out of its Depression even earlier by building up his military and even avoided blame for too much taxation by simply stealing the wealth of the Jews to help finance his world take over.

The argument between guns and butter continues to this day. Not making a choice between them is what tarnished LBJ’s Presidency. He wanted both when the GOP only wanted the war spending because it suited their appeal to patriotism. Actually this is not quite true. In my youth the GOP had pretty much conceded the point that John Maynard Keynes was right about government spending’s power to get an economy moving. They had been saddled with Herbert Hoover’s fabled inaction for forty years by the time I became politically active. They were all Keynsians according to an economic mantra of the sixties and seventies. But they would soon abandon Keynes when they resorted to their “Southern Strategy” to win elections. The South had benefited greatly by FDR’s spending but had been very stingy doing its level best to make sure black southerners got nothing. The traitor LBJ began throwing money at poor blacks in the South’s estimation and this after enforcing their Constitutional right to vote in 1964 by trampling all over the South’s much cherished Jim Crow State’s Rights.

Suddenly all the Republican Keynesians were on the run and replaced by small government Southerns who only wanted to spend money on Defense, being the great patriots they were. George Herbert Walker Bush from that old discredited pre-southern GOP jabbed at the ascendant Southern appealing Ronald Reagan by calling his Defense spending plans “Voodoo Economics.” He shut up about that to become Vice President and then watched as Reagan borrowed like crazy to pay for Star Wars which did indeed help bring the Soviet Union to its knees at the cost of a massive Federal Debt. It was the debt that the old GOP found disagreeable but not the new GOP. It discovered that it could go into debt and then let Democrats take over and beat them up for the Debt by reducing federal Domestic spending for things like the War on Poverty.

The old Democratic accusation that Republicans were all about “trickle down” economics lost all its sting in the age of a thousand billionaires and the biggest prison population in world history.

So this is what woke me early this morning. Its why I didn’t vote in the primary election for the first time in my life and while I will barely give a damn when I vote in the general election next week. Our politics today is mentally stunted. We need more minorities to wrest the economy from the old white folks who were given so many economic protections during LBJ’s Great Society that today they live well and long while one-in-five American children go to bed in need.

Now on to that unpleasant editing I promised myself I’d get to.

Duluth’s unique Red Plan financing

The School Board has been lobbied by former member Tony Stauber to rethink vocational education which has taken a hit in the Duluth Schools. There seem to be a lot of educators rethinking the role of votech schooling in the age of student bankruptcies over college loan repayments.

But this reply to Tony from Art Johnston hints at a different kind of financing.

Hi Tony and always great to hear from you!

As you know, the former school board and Superintendent adopted the $293 (now $315) million Red Plan in 2007. It was originally planned to have ISD 709 keep and use the Secondary Technical Campus. In 2009, the former board and Superintendent modified the Red Plan, without public discussion, to close the STC and move many of those programs to Denfeld and East High School. So the STC, along with CHS, closed in 2011.

We still do have excellent technical programs in automotive technology, construction technology, food preparation, nursing, and horticultural programs. Many of these programs are receiving grants form various industries. Can we do better in our technical programs? I’m sure we can.

But I don’t believe that promoting technical education versus academic education is a zero-sum-game. We must to better all on segments of what we teach.
A bit of history: we are still paying the debt for the $6.6 million STC that was built in 1996. We still have about $1 million in payments to go before that debt is paid off. And we still have no buyers for either that STC,the Central High School buildings, or the site.

It is interesting to note that the STC was also constructed without a referendum in Duluth. There have been three schools projects in Minnesota done without a referendum: the STC (now closed); a school in St. Paul (now closed), and the Red Plan. According to MDE, those are the only major schools projects in Minnesota constructed by bypassing the referendum process. Hopefully, we have learned that listening to the public may have been a way to prevented these three less than optimal plans.

And listening to the public may have been a way to promote more jobs oriented HS programs as you are suggesting.

Thanks for sharing your thoughts.

Art Johnston

Staunch vs. stanch

My buddy sent me a couple proof reading corrections for the last post in the second paragraph. One pointed out I meant stanch when I used staunch. They can be pronounced the same way with the “aw” sound but I’ll admit I never recognized that they had different spellings. They both suggest something akin to the strength of reinforcement. For instance: The GOP must stanch the loss of elderly adherents by by being less staunch in its nativist inclinations.

The first nativist party in the US the “No Nothings” was anti immigrant. Too many Catholic Irish were fleeing the potato famine bringing their terrible religion with them. Subsequent bouts of nativism hit American shores when too many Chinese showed up during the California gold rush. Then horror of horrors strangely speaking Eastern Europeans started answering the Corporate advertisements from American firms looking for cheap labor. That was a straw that led to a law I couldn’t recall having ever heard about. At the turn of the Ninteenth Century Congress passed a law taking American citizenship away from women who married legal immigrants. For thirty years that law deprived tens of thousands of women of their birthright and did so retroactively including one woman from Two Harbors.

Abe Lincoln was a pragmatist who was quite happy to solicit Irish and German votes and even No Nothing votes. Today’s GOP wouldn’t have much use for that RINO kind of thinking. Over the next couple decades they will find it harder to stanch the loss of elderly nativists and will be forced back to Lincoln’s pragmatism. Viva el Rinos.

There is another tenant of the modern GOP that might have to undergo some revision, the wealth protection laws that turned estate taxes into “death taxes.” Apparently to discover just how it was that the once anticipated economic equality associated with democracy has been turne on its head one economist began reading antique novels from earlier centuries. inheritance and wealth. He quotes a character in a Victor Hugo novel who tells an ambitious young man to forget about work and to marry a rich woman. Hey my Mom could have told him that. She read lots of antique novels by the Bronte’s, Jane Austin Charles Dickens etc. We had talks about how families did their best to protect their wealth. I read about primogeniture in my own history books. That where only the oldest son inherited all the land and the younger brother’s took the hindmost.

Anyone who has watched a lot of PBS’s Masterpiece theater over the years has seen the same like Downton Abbey. Marry a rich American woman. That was the call of several generations of failing noble English families and its been grist for hundreds of period piece dramas.

Well-to-do Americans have jealously guarded their wealth by intermarrying their children in America for generations. Its been a fixation that has been shared by other rich folk throughout history. In more recent generations it has been aided by country club memberships and gated community living. Those knocking eagerly from the outside for a piece of the action have been regarded with suspicion. My Mother told me about the woman who married a cousin of hers who was regarded as a “grass widow.” I guess that meant she was hiding in the grass waiting to snare their precious son. The threat to disinherit never was broached but that is another very real threat that has made it into countless dramas.

Well, the rich are getting richer and not only because they have built a social wall around themselves but a legal and legislative wall built with a political agenda to keep taxes like the estate tax low.

What kind of folks would accrue this wealth and then fight back attempts to share it? That’s another NPR story. this. Is it any wonder that NPR and PBS are always on the GOP chopping block?

The Tuesday Trib’s trio…

…of stories pertinent to the levy:

The first is about the retirement of Terry Matson. The eye popping figure is this. When he began promoting tourism in Duluth in the 1980’s our tourism revenue was $80 million. Today its $800 million almost twice the cost of the Red Plan. That money is a great boon to Duluth and I’m gratified to have lived in the City to watch it grow. Duluth was a pretty seedy and shrinking town when I moved here in 1974 before its coal blackened Bowery was leveled and replaced with the Holiday Center.

However Dr. Dixon got his Red Plan accomplished and whatever its flaws Duluth can support it. Its not only tourism. Its the phenomenal growth of our local colleges. UMD had an almost tiny 4,000 student enrollment when I moved here. Today it has a hefty 11,000 students. One whole new industry has set up shop in the ruins of the Northwest Airlines Maintenance Base that Cong Oberstar engineered, Aircraft manufacture. Transportation, as always remains strong and the potential of new area mineral development, despite the environmental dconcerns, will redound to Duluth’s economic benefit.

Yes, its a damn shame the Red Plan was so unnecessarily big that it sucked the oxygen out of the air. Yes, its paid for with regressive taxes paid by a lot of folks on fixed incomes instead of the income taxes of the vain elite who wanted a vanity project. Still, these objections should not overrule a sensible call to stop the bleeding in our schools.

The second article is really the Trib Editor’s comment about Minnesota’s surprising economic growth recently despite the anemic overall performance of America as a whole. Things augur well for Minnesota as a whole and Duluth in particular. People in Duluth are justified in showing a little confidence.

Finally, there is the AP story about the State beginning to repay its recent borrowing of public school money to cover its financial butt. Its not the Godsend that it might appear to be. Its three quarters of a million dollars but all it really is is the speeding up of deferred payments the Districts would have gotten originally. Its a story about improved cash flow to our public schools not a story about an unexpected windfall. Still, lots of District’s including Duluth had to do costly short term borrowing to make ends meet while the State hoarded money the District’s had coming.

Herding School Board Cats

Readers of recent posts did not know it at first but I was keeping up with the School Board race from Iowa. The Trib had several stories for me to comment on. Fortunately I had time to respond before the primary election for those who can’t help but hang on my every word.

I also was challenged on my recollection of Board member Ann Wasson’s tenure. I’d posted that she had been on the Board for only 8 years. That challenge prompted me to spend a couple hours trying to resurect all the school board members since I was first seated in January of 1995. There were a lot of them although fewer in recent years because in 2004 the Board adopted member Mary Glasses pet idea to reduce our board down from nine to seven members. I think Mary thought this would save taxpayers money by subtracting two $5,400 salaries of Board members from the payroll.

I knew that this was negligible savings but I figured a new superintendent would find it easier to heard seven instead of nine cats so I went along with the proposal which required the legislature to OK our downsized Board in law.

I think history has proven my insight about cat herding to be more reliable than Mary’s solution for extravagant spending.

When Dr. Dixon took over he had only two long-term Board members to deal with Mary Cameron and Tim Grover. No one else had much more than four years service. Ann Wasson had only one year under her belt. She was elected to fill a two year seat during the transition to seven seats and got elected twice after that to four-year terms. She’s retiring with ten years under her belt.

One of the miracles for Dr. Dixon was an attentive and naive school board which took his direction as though hypnotized. In short order they authorized over $400 million of spending on new school facilities on their own authority rather than go to the public for a vote.

If I could go back in time to restore that $10,800 for two extra school board members to the school budget and skip payments on what is now close to $500 million in Red Plan spending I would do it in a heartbeat. How ironic that our School Board proved to be penny wise but pound foolish.

Meanwhile the union is pushing for larger class sizes…

…while asking for ways to make them smaller.

That’s my take from this story in today’s DNT about the status of the Contract talks.

“The Duluth teachers union is attempting to lower class sizes through contract negotiations by way of a capped number of students in a teacher’s day in middle and high schools, or more pay if the number goes beyond that. It also wants more money for teachers willing to work in low-performing schools and who juggle two grades in one classroom.”

Union President, Frank Wanner, wants to use the District’s meager resources to bring down the secondary class sizes. There is only one practical way to do that. Raise the number of students in elementary classes. I know damn well the banks who were glad to take operations money to repay their bonds will take a dim view of our reneging on the debt repayments. The banks and our contracts with them take precedence over our schools and our children.

One alternative would be to ratchet back health insurance coverage and raise deductibles. Perhaps with so many senior teachers retiring the younger teachers could assert themselves and demand this concession to lower class sizes.

My thanks to the Timberjay

My friend who keeps me directed to the ever informative Timberjay sent me this link this morning. It made it clear that the Duluth Schools will have some relief from its own remarkable alienation of local voters. Sen. Bakk saw to it that every school District in the state will be given additional levy authority without having to go to voters”

As part of the education package approved in the 2013 session, the state Legislature gave school districts the ability to levy up to $300 per student without voter approval. Districts already had the ability to seek additional funds through an excess operating levy, but voters had to okay the tax increase.

The Duluth School Board will surely use this as it has almost no ability to win voter approval of excess levies after the Red Plan debacle. I must admit that if I bother to run and then get elected I would certainly put this new authority to use.

The Jay also exposed the terrible decision of a few of the St. Louis County School District’s senior teachers to gift themselves unreasonably generous insurance benefits over the needs of their entire membership and the needs of the community. I guess their leaders bear a strong resemblance to our own Frank Wanner.

A little well deserved Schadenfreude

Tammy Duckworth turns the knife very artfully. (To my overseas readers – Duckworth is a double amputee veteran of our recent wars who was elected to Congress in a middle finger salute to the nation’s self-righteous neo-cons.)

Robert Bateman says of this…

Tammy Duckworth, who lost both legs and had her arm sewn back on, mostly, lays it down. A businessman is called out. It seems his company got something like $500 million in contracts from the government, primarily because his company was a “small business, disabled veteran owned.” His disability? When he was in prep-school, he twisted his ankle playing football. The prep school was the one at Monmouth, which is the feeder for West Point, but if you come in from civilian life, it has no military obligation at all. …

157 million dollar bailout?

A couple weeks ago the Duluth paper published an update on appeals to the state from the Duluth Teachers pension planners to bail them out since they had run short of the funds necessary to pay for the pensions of retired teachers. In part this shortfall came from not reducing payments soon enough as the economy tanked a mistake that fell only on the shoulders of the pension board of directors. The story said that the state had decided to plug the hole to the tune of six million dollars. That almost got my hackles up but I couldn’t tell if the payment was a one time payment or not. I didn’t mind a one year cash infusion but I wondered if the state was planning to expend this money for many years into the future. I was too busy to call and ask what the situation was but I had planned to post my question on the blog.

Now I know the answer. It came in the DNT when it republished the St. Paul Pioneer Press’s editorial on the subject. The answer is yes. For each of the next 25 years or so the state has agreed to plug DFRTA’s hole to the tune of $6.3 million annually. That means that our retired teachers could get a $157 million windfall to cover the poor decisions of their pension plan. Other pension plans will be getting similar bail outs and we will just have to wait to see what happens to the mother of all public pensions in Minnesota, PERA, with a projected $16 billion shortfall.

“…the remedies should come with a loud note of caution for the public: Public-employee pension funds are under the influence of politicians who, as they apply the remedies, have the power to do favors and solve problems with somebody else’s money: ours.

The Legislative Commission on Pensions and Retirement, which also approved $6.3 million per year in state aid for the plan for Duluth teachers, got what amounts to a reality check in testimony from retired Rockridge Elementary Principal Tom Threinen. He told lawmakers the additional contribution costs for the district will result in the loss of at least five teaching positions and make it harder to reduce class sizes and increase offerings, as both the Duluth News Tribune and St. Paul Pioneer Press reported.”

I’ve commented before about pension plans most recently on the red ink in Illinois. One of the faults with democratic elections is the emphasis they put on today at the expense of tomorrow. In the last two decades of the war declared on moderate “RINO” republicans the consequence is that sane fiscal voices like Congressman Jim Leach of Iowa and many others have been killed off in GOP primaries by simple minded, short term strategists who have opted to push “pure” ideologically driven and dreadfully impractical candidates. The vacuum this has left in the vital center of American politics has fallen to Democrats like President Obama. Its still a huge vacuum.

Its hard to give any credit to the current GOP minority in the legislature because there aren’t many centrists left. Their current leaders describe the remnants of the Republican side of the legislative aisle as the “grownups.” I wish.

Decisions like this one to bail out overly ambitious and unsustainable pensions give all such pension boards an incentive to game the system knowing that poor and incautious investing could be bailed out by taxpayers. Its simply not fair and its not sustainable.

Demographics #1

I’d heard recently that American women’s longevity, which for so long exceeded men, was beginning to wane and men were catching up.

That is what this map suggests.

I found it on the Daily Dish with some interesting analysis.

What I noticed about the map is that the locals where women’s longevity is taking the greatest hit also seem to be the rural Red States that have been voting Republican. This raises lots of cause and affect questions for me.

The GOP’s 80 billion, oops – 2 trillion, oops – 6 trillion war

Back in 2002 Newsweek’s economist Robert Samuelson shrugged at the estimated $80 billion cost of the wars in Iraq and Afghanistan.

I’ve never forgotten that poor prediction which helped assure me we could handle Iraq. He was very wrong and he admitted this in 2007 in a column I’ve only now just discovered.

But even his 2007 mea culpa was off by 100 or 200%.

Where’s Walker on Kestrel?

Wisconsin’s Governor Scott Walker wasn’t mentioned in this story yesterday on the failure of Wisconsin to make good on its financial pledges to the fledgling Kestral Aviation of Superior. Maybe Klapmeier is afraid the Governor will punish his company if he blames the Governor personally rather than the state for reneging on his word.

About our local teacher pension fund

Kudos to the DNT’s Jana Hollingsworth. After one of my posts about pension funds and my experience with the DFTRA I got the impression that she thought it was time she did a little research. Her story in today’s DNT did a very good job explaining how stupidly the pension fund for our Duluth public school teachers has been run at a time when conservative prudence was called for.

Its hard for me to be very sympathetic to the man in charge of the fund. He once wrote a letter to the editor saying it was high time I left the school board because I swore during a Board meeting. (It was because I wanted a levy referendum for more classroom spending placed on the ballot when one prominent Board member was bad mouthing it)

All the time I was busy fighting to have the Red Plan placed on the ballot for fear it would decimate our schools Mr. Stoffel oversaw increased pension outlays to growing numbers of retirees. Now he wants the taxpayers to offset his pension funds losses which can’t be made up because the Red Plan has thinned out ISD 709’s teachers who are DFTRA’s contributors. He’ll be lobbying to have the taxpayers make up for his tardy actions to shore up the fund. Perhaps the state should go into the business of insuring all pension funds both public and private. I’m sure a lot of private pension fund managers would love that kind of insurance.

The poor working teachers in Duluth with 40 kids in their classrooms are carrying a heavy burden and one of their rewards will be a much reduced pension.