No Runny Eggs

With just a few days left in the year, this is the time when numerous publications put out “Top 10” lists of events and other notoriety from the year that is about to finish.   In this article from the UK Telegraph, Oxford University puts out its top 10  most irritating  phrases for the year.   “At the end of the day,” “24/7” and “it’s not rocket science” are three of their most offensive phrases.

I’m not very good at year end top 10 lists. I find that my memory doesn’t retain enough items to make a successful list. In fact, most times when I see a top 10 list I’ll read it and go “oh yeah, I’d forgotten about those 3 or 4 items.” Yet, I still feel the need to participate in these year end remembrances so I’ve found a way to use my limited memory to best use; I’ll create a list for the year that is coming up.

So, without further ado, my sole entry for most hated phrase of 2009 is:

Shovel Ready

“Shovel Ready” is not a new term, it’s been around for a while.   It has typically been used in property development and meant a piece of real estate that had been through all of the proper approvals, planning  and zoning and was ready to begin construction immediately.   In 2009 “Shovel Ready” will be certainly used to describe a project for which a quick start could be had but it will also be used in other ways.

President elect Obama continues to ponder the mother of all stimulus bills.   He’s asked Governors, Congress persons and others to submit lists of “Shovel Ready” projects that are being held up due to a lack of funding.   The theory is that by having the Federal government spend money on projects it will stimulate employment and get infrastructure built that would otherwise sit on the drawing board.  

Unfortunately, with the only criteria for submission being “shovel ready,” we’re already seeing that “shovel ready” does not equate “needed,” “cost effective,” or “smart.”   According to the Star and Tribune, included in “shovel ready” projects are:

$4.8 million for a polar bear exhibit in Rhode Island and $1.5 million for a water slide in Florida.

And, in the district of King porker himself, Minnesota Democrat Jim Oberstar, chairman of the House Transportation and Infrastructure Committee, we see the requests for the following:

$2 million for a lake-walk extension at Beacon Point and $6 million for snowmaking and maintenance facilities at Spirit Mountain.

Can anyone explain to me how leaving these four projects, and I’m sure many more like them, on the drawing board would hurt our chances of economic recovery?

Each of Oxford list of irritating phrases was originally used   within their true purpose.   However, in time and through over use, the phrases became perverted to mean something other than their original intent.   The same will happen to “Shovel Ready.”   By the end of 2009, “Shovel Ready,” rather than a project that can quickly be initiated, will come to mean anything that couldn’t pass economic muster by well thinking people but got shoved down the public’s throat for the benefit of some minority constituency, anyway.

Come to think of it, “shovel ready” will likely have one other meaning in 2009.   Anytime you hear that something is “shovel ready” you can easily assume that what will be shoveled near term isn’t any dirt, but a lot of manure as the person selling their project tries to get common sense pushed aside and political graft inserted.

In an Oped piece in the Washington Post  yesterday, one of Barack Obama’s economic advisers, Lawrence Summers attempted to lay out the reasons for the next, still growing, stimulus package.   The stimulus package was originally discussed to be in the $600 billion range.   However, as Obama gets closer to his first attempt at sitting in the driver’s seat the numbers have continued to rise.   Lately, the  range  discussed has been as high as  $1 trillion.

Summers takes a typical liberal approach to spending lots of money that has no profit or benefit on the near term horizon; we’re investing in our future:

The Obama plan represents not new public works but, rather, investments that will work for the American public. Investments to build the classrooms, laboratories and libraries our children need to meet 21st-century educational challenges. Investments to help reduce U.S. dependence on foreign oil by spurring renewable energy initiatives (many of which are on hold because of the credit crunch). Investments to put millions of Americans back to work rebuilding our roads, bridges and public transit systems. Investments to modernize our health-care system, which is necessary to improve care in the short term and key to driving down costs across the board.

Funny, I seem to remember a lot of chatter from the portion of the “15th Century, here we come” Left that told us that drilling for oil on our shores wasn’t worth doing because it would take years before we would see the benefit.   Now we have the left telling us that “investments” that will take years to pay off are the right thing to do….anyone else confused?

Along with “investing for the future,” Summers uses the “it’s all about jobs” argument for spending billions of dollars we don’t have:

A key pillar of the Obama plan is job creation. In the face of deteriorating economic forecasts, Obama has revised his goal upward, to 3 million. For one thing, significantly fewer positions would be created in the absence of any recovery plan. Second, more than 80 percent of these 3 million jobs will be in the private sector, including emerging sectors such as environmental technology. This is a bold goal. But economists across the political spectrum recognize that it is far less risky to stand firmly against the forces propelling our economy downward than to be timid in the face of a mounting crisis.

The creation of 3 million jobs is a new target.   Obama’s original plan was a modest 2.5 million but as the economy has continued to soften Obama has stepped up his replacement plan.   The extra jobs is part of the reason why the amount of stimulus has increased.

A commentary by Caroline Baum uses comments by Paul O’Neill to show how inefficient the stimulus will be in terms of creating jobs:

O’Neill did the math so you don’t have to. Each job "will cost $250,000, which doesn’t suggest much labor intensity for the dollars spent," he said. "It makes me wonder if any of the planners or commentators are good at arithmetic."

Well of course they’re not but that’s beside the point.  

The real question in this is whether Obama’sstimulus plan can actually create 3 million jobs?   If he can, how will he and what silver bullet of economic development does he know that mere mortals in economics don’t?   The answer is found hidden, but accessible with a little work, smack in the middle of Summers’ oped:

A key pillar of the Obama plan is job creation. In the face of deteriorating economic forecasts, Obama has revised his goal upward, to 3 million. For one thing, significantly fewer positions would be created in the absence of any recovery plan. Second, more than 80 percent of these 3 million jobs will be in the private sector, including emerging sectors such as environmental technology. This is a bold goal. But economists across the political spectrum recognize that it is far less risky to stand firmly against the forces propelling our economy downward than to be timid in the face of a mounting crisis.   (emphasis mine)

At first blush that statement doesn’t really seem like much; 80% in the private sector sounds good.   However, that leaves 20% in the public/government sector.   Again, doesn’t sound too bad, at first blush.   According to the Bureau of Labor Statistics there are approximately 144 million people employed.   Of that, just under 2 million are employed by the federal government. State and local governments employ another 8 Million for a total government employment of about 10 million.

If 3 million jobs get created and they break down 80% private and 20% public, that would mean that 2.4 million jobs are created for private enterprise and 600,000 are added to the government ranks.   2.4 million jobs on top of the 134 million private sector jobs means that Obama’s plan will increase the private sector by 1.8%.   In contrast, adding 600,000 jobs to the existing 10 million government jobs means that Obama’s plan will grow the government sector by 6%, more than 3X what he plans to do for the private sector.  

Just to keep the “it’s for the children” crowd happy, I’ll do the math assuming that Obama really means the 20% to include education.   There are approximately 8 million public school employees.   Taking those from the private and adding them to the public still leaves the private sector getting less than 60% of the growth that Obama has slated for the public sector.

Lest you think I’m one of those folks that thinks government employees are a complete waste of time, I’m not.   Like cats, there are some useful purposes for them.   Also like cats, good etiquette keeps me from describing on a public forum, what  most of those useful purposes are.

Here’s the point, increasing employment by adding government employees is easy.   How tough is it to hire a bunch of people to do nothing particularly useful beyond increasing the rolls of union paying members?   The trick in this is how is Obama going to pay for those jobs long term?   Adding jobs to government when you are about to inherit an  $11 trillion debt and an annual deficit under the best circumstances that will be $500 billion, is the same as the folks who took out the 110% home equity loans but found that they couldn’t afford the payments when the interest rates went up.

It’s ironic that to justify this massive government spending, Summers is willing to discount and downplay near term benefits claiming that this is being done for our future.   I wish he was just as concerned about the future implications of the debt and bureaucracy that will be created.   Again, like the folks who bet on ever increasing home valuations and income streams, I wonder if we’ll be able to afford the payments?

As the bail out of The Big 3 has been discussed the past few weeks, much has been made about the unsustainable cost structures that they have.   Depending upon the report you see, Detroit’s automakers pay  somewhere around  60% more  per labor hour than their domesticated foreign competitors.   The UAW President, Ron Give-U-the-finger, will quickly contend that Detroit is only paying a dollar or so more than their competitors.   The truth is that both statistics are accurate.   How can that be?

When UAW Ron gives you a labor rate, he wants to talk only about the wages that are actually paid to workers that are assembling cars today.   While that is a labor rate, it’s not the one that is used by accountants in determining costs.   The labor that is 60% higher includes not only the costs of the people on the line today but also includes the costs of providing retirement benefits for folks who worked that line year and year ago.

Mark Steyn provides some information of how challenging the Big 3’s labor issue is in a column from Friday:

General Motors, like the other two geezers of the Old Three, is a vast retirement home with a small money-losing auto subsidiary. The UAW is AARP in an Edsel: It has three times as many retirees and widows as “workers” (I use the term loosely). GM has 96,000 employees but provides health benefits to a million people.

Holy upside down, Batman!   It’s not hard to understand why the Big 3 have profitability issues when they are paying for 10 employees for every 1 they have working!

Now to be fair, GM, Ford and Chrysler each negotiated contracts that provided for this level of benefit.   The UAW retirees are getting no more or less than what was agreed to in those contracts.   My point here is not to argue what should be done about those agreements, just to let you know they are there.

In 1960 there were 5 workers for every individual who was receiving  Social Security.   Today, that ratio is around 3.3 to 1.   Most analysis of the solvency of Social Security suggest that in the future we will see 2 workers supporting 1 retiree.   Anyone noticing a trend?

Many people are upset with the Detroit Big 3.   They are upset about the bail out.   They are upset that the auto makers have had an unsustainable cost structure for years and have either moved slowly or done nothing about it.  

It’s funny how many in Congress and the general public are quick to point to the Big 3 executives and brow beat them for not anticipating their problems and dealing with them.   Yes, many people willing to point the finger at someone else but when it comes to dealing with a similar problem that they control or are impacted by…..say Social Security, they are perfectly willing to turn their head and look the other way.

If you think the bail out of Detroit’s retiree’s is a problem, you ain’t seen nothing yet!

Obama Expands Recovery Plan, Aims for 3 Million Jobs

 As this story lays out, President elect Obama believes that the economic down draft is more serious than he first thought.   As a result, his original goal of creating 2.5 million jobs appears inadequate.   He now wants to target creating 3 million jobs.

Lest you think Obama’s is the “Gang who can’t shoot straight” and will charge in without a plan, put your worries to rest:

Obama representatives met this week with congressional staffers to discuss a plan estimated between $675 billion to $775 billion, the aide said, though earlier this week another aide said Obama may ask Congress to approve as much as $850 billion. Obama hasn’t specified a figure.

Those figures are all before Hank Paulson, or his successor, go to Congress to get the remainder of their $750 billion “mad money” pool.

Further, wanting to appear the adult in this new regime, Barack has told “the kids” not to have any parties with the tuition money:

Obama during the meeting told his advisers that spending proposals can’t include lawmakers’ pet spending projects; that funds should be directed toward already approved projects so jobs can be created quickly; and that government should help facilitate private ventures by removing bureaucratic red tape.   (emphasis mine)

Does anyone really believe that the government can spend $850 billion without funding “pet projects?”   Is anyone so naive to believe that, unless you’re one of those favored vassals like Hank Paulson, Fannie Mae, Freddie Mac or ACORN, for whom accountability is not a prerequisite, that the government could infuse $850 billion into projects with out increasing red tape, let alone, decrease red tape?

In the movie “Mr. Mom,” Jack (Michael Keaton) takes the role of “domestic engineer” after he is laid off and his wife, played by Teri Garr, lands a role as an advertising executive.   Jack’s role as domestic engineer is not his dream role and part of the plot focuses on the challenges he has  reconciling his new responsibilities with his personal definition of masculinity.   At one point in the movie, Garr’s new boss picks her up at the family home.   While waiting for Garr to get ready for a business trip they are taking, her boss makes small talk with Jack.   As the boss is unable to relate to Jack as the domestic engineer, he asks about Jack’s home remodeling project that he has undertaken.   He asks Jack whether he’ll be wiring 220 electrical service with the remodeling.   Not knowing anything about wiring, but wanting to ensure that he portrays that he hasn’t lost an ounce of masculinity, Jack answers “220, 221.   Whatever it takes!”  

When it comes to job creation and printing of inflationary dollars to cause it, Barack Obama is using the same false Machismo that we saw from Jack in “Mr. Mom,”   2.5, 3 million, whatever you need.   $675, $850 billion, $1 trillion, whatever it takes.