Posted inPhoenix Politics: Arizona/Phoenix

Will SB 1070 help or hurt?

On Sunday, the Information Center published a 573-word story, accompanied by many graphic and break-out doo-dads, asking: "Will SB 1070 help or hurt the economy." The lede: "Arizona's new immigration law will likely affect a sizable swath of the state's economy, but experts are uncertain whether it will bring overall economic gains or end up scarring the state with losses." I know one thing: These kind of shallow stories are among the many self-inflicted wounds killing journalism. Oh, I forgot, Gannett doesn't do journalism, it is an "information broker."

An old hand once told me, "Immigration isn't the most difficult dilemma facing America. It's worse." It is a result of Americans' insatiable addiction to cheap labor. But it is part of a far more complex set of phenomena involving a Third World nation bordering the First World superpower; globalization's destruction of Mexico's peasant economy; mass migrations on a scale never before seen on an overpopulated planet; corporate greed amid a worldwide glut of labor, and billions of poor living without hope but primed for instability and extremism. The topic deserves at least the kind of sophisticated work done early last decade by The Arizona Republic with the "Dying to Work" series.

The overwhelming evidence is that SB 1070 will be a net economic loser for a state already in a depression. The most comprehensive national work on the public costs of illegals vs. their output for the economy has been done by UCLA's Raul Hinojosa. The verdict: The aliens are a net positive. Nowhere is this more true than Arizona. The anti-immigrant bill is already dearly costing the crucial tourism industry from boycotts. Its explicit political extremism will deter capital formation and investments by quality corporations. To the extent that it causes an exodus of illegal immigrants, it will further erode the tax base, for those aliens pay a disproportionate share of their incomes to Arizona's regressive tax system. Most will stay, even deeper in the shadows and out of the mainstream, adding to the state's lost human capital and talent. Most important is this: No low-wage, easily exploitable migrant labor force, no Growth Machine.

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Posted inPhoenix

The men who would be Frank

Four finalists have reportedly emerged to replace retiring Phoenix City Manager Frank Fairbanks. All are current City of Phoenix employees. They're good men, and David Krietor and Ed Zuercher especially hold promise. Still, the finalist lineup reinforces the sense of Phoenix's parochialism and inward-looking mindset. It's a problem that extends far beyond City Hall. But it's significant given government's huge footprint in a city with no major corporate headquarters, influential civic stewards or powerful business interests beyond building more sprawl (which apparently extends to self-dealing city council members). There is, simply, no other major American city as limited as Phoenix in its economy or centers of power — or its lack of self-awareness. So something that elsewhere might seem routine, carries big weight and risk here.

This is also a portentous moment for a changing of the guard. When Fairbanks became city manager in 1990, Phoenix was in a nasty real-estate recession but otherwise still on a sunny trajectory it had enjoyed since the end of World War II. City Hall's reputation for clean government and efficiency earned it the Bertelsmann Prize as one of the two best-run cities in the world. In the early '90s, the city still had corporate leaders such as Dial and Valley National Bank. Chastened by the real-estate bust, leaders established the Greater Phoenix Economic Council and worked to diversify the economy. Phoenix was the uncontested regional leader; the suburbs were still relatively small. Its population was much more middle class.

Fairbanks' successor will inherit a far different city, and not merely one that has grown to 1.5 million from 983,000 in 1990.

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Posted inPhoenix

The conscience of the Kookocracy?

They wish they knew how to quit me. Even though it's been two years since I wrote a column for the Arizona Republic, I keep popping up on various Web sites as the devil that's missed by the Kookocracy. After all, who can they now denounce as a SOCIALIST!! — Clay Thompson? The pretty-in-pink Moms Like Me page? Anyway, this was brought home again in a story last week about a conference on the flatlined-in-a-body-bag Arizona economy.

One commenter generously wrote: "Jon Talton preached this for nearly a decade, yet no one believed him.
In fact, the GOP-led Legislature and the Real Estate Industrial Complex
put a lot of pressure on The Arizona Republic to silence him, and in
the end, Talton was run out of town. Perhaps if those idiots had
actually paid attention to what Talton had to say, then the state
wouldn't be in this mess. And legislators wouldn't have to solicit
advice from ordinary Arizonans, as they did just last week. Fools." This was followed by — I am not making this up: "You mean John Talton the corporate socialist shill?" Etc. Spelling has never been their thing.

Back to this big summit, convened by the Greater Phoenix Economic Council. Chairman Michael Bidwill "said that…the state relies too much on retail and contracting revenues." Yes, he of the Arizona Cardinals whose taxpayer-funded stadium in the cotton field was meant to be a magnet for contracting and retail. Glendale Mayor Elaine Scruggs said, "It's overwhelming. It's really overwhelming when you look at all the areas where we are deficient." Duh, ace, as we said in fifth grade. You get the picture. Deeply unserious — another summit to nowhere. But rather than go back to discuss the real problems and solutions, which you can find here, I want to encourage the Kookocracy to use Teabag Day to redouble their efforts.

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Posted inUncategorized

To bail or not to bail?

Let’s set aside the demands of the extremists on the right, calling for more deregulation and tax cuts to address the financial crisis. It’s like trying to discuss the finer points of Plato with a small, yapping dog. Otherwise, I can understand the desire on the left and right to "punish Wall Street" by defeating the bailout plan. Unfortunately, the markets are so intertwined and inherently fragile, the first casualties are going to be on "Main Street" (a bittersweet anachronism for a nation that has mostly abandoned its main streets).

Wall Street — and increasingly overseas investors — owns Main Street.

The plan voted down yesterday was flawed but better than the original Czar Paulson contraption, which would have given the former head of Goldman Sachs unlimited access to use American treasure trying to extinguish the wildfire he and his greedy buddies started. Well, not quite — and here we get back to the unworkability of "punish Wall Street" argument. Deregulation, a casino-like attitude on Wall Street and a bubble-blowing Fed were the biggest culprits in the mess. But, so, too were the American people.

We voted in the deregulators and stood cow-like as it happened, the jobs disappearing, wages stagnating. Worse, too many of us thought we could get rich quick off real estate, like day trading before it. We bought overside houses and ran up credit-card debt we couldn’t afford. We bought SUVs to drive ever-longer distances as oil was peaking. We wanted tax cuts that gutted our schools and infrastructure. We wanted all that stuff at Wal-Mart. The casino became our ruling totem. It’s quite a remove from the generation of the Boomers’ parents that saved and waited to make purchases until it could afford them. It’s their passed-along wealth that is helping cloak the "banana republic with nukes" that we’re becoming.

So here we are. Were it not for the legacy of Franklin Roosevelt, we would already be seeing bread lines. And how many better ways could we use $700 billion…

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Posted inUncategorized

Economics 101: Watch me fail to explain the crisis to the duhs and ignos

Commentators keep trying to explain the financial meltdown and subsequent bailout debate by using analogies that "average Americans" can understand. We hear such things as "imagine Wall Street was your kid that ate a big bag of candy and got sick, then wanted more candy," etc.

The problem is that the calamity is so bad partly because it is not simple. The venality behind it is something everyone should understand (and many "average Americans," with their get-rich-through-liar-loan-financed-rent-houses schemes participated in). But the essential mechanics and details of how we got here, and how the situation might be improved, are highly complex. This is a stark reminder of a danger facing us: America is saddled with one of the least informed electorates of an advanced nation, and one hardly as intelligent or engaged as their forebears who actually built the wealth in money, institutions and ideas that we are now rapidly throwing away. It shows the risk of the continued governance by "conservatism," which by its very nature can’t handle complexity.

Here’s an analogy for the bailout: triage, longer-term care and rehab. The paramedics and ER personnel need to identify those that can’t be saved and set them aside, while focusing on the most life-threatening cases where the patient can still be saved, leaving the less injured for later. But I can dumb it down no further. I can only add complicating factors. As in, the paramedics have tools that will have unpredictable effects not only on the patients but also on everyone in the world. The patients’ bodies are wired into everyone else in the world. And the medics are working on injuries they never trained for.

Simple enough? Of course not.

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Posted inPolitics: National

Barely avoiding economic judgment day, maybe

I’ve been traveling this week as the American financial markets came as close to collapse as at anytime since 1929. And make no mistake: this disaster is real, it will unfold in unexpected ways, and it won’t be an event that is over quickly such as in 1987 — or even the S&L scandal. Some early takes:

–It would be ironic if Republican John Sidney McCain III were elected and George W. Bush left one positive legacy by stabilizing the meltdown — the "let the markets rule" so-called conservatives, who saved the day thanks to mechanisms put in place by Woodrow Wilson, FDR and successive liberals. If we didn’t have tools such as the Fed, FDIC, SEC, etc. — this could have been a calamity on the order of the "panics" of the 19th century, with worldwide contagion.

–This event should totally discredit the deregulation, market-religion ideas pursued over the past 25 years — it is the direct result of these policies. But maybe not. The administration may use unprecedented intervention to save capitalism, and then go back to their Milton Friedman sock-puppet talking points. And the duhs and ignos won’t care — Obama’s black, remember?

–Gee, remember when W intended to "spend his political capital" privatizing Social  Security into the toxic investment bank dumps that are now failing? Republican John Sidney McCain III still wants to do this.

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Posted inPolitics: National

Let’s look at the fundamentals of the American economy

Republican John Sidney McCain III is trying desperately to back away from his "fundamentals of the economy are strong" line, even going so far as to say he meant American workers. But not so fast. In fact, it is the fundamentals of the American economy that are in dangerous trouble. Let us count the ways. I’m going to have to give you some straight talk, my friends:

1. Debt. The nation is deeply in hock to creditors worldwide. We used this line of credit to finance the housing bubble, wars in Iraq and Afghanistan, tax cuts to the richest Americans, rebate checks that went into the ether and the privatization of hundreds of billions of dollars in government services. It’s paying for the bailout of Bear, Sterns and it stands to take a devastating shock from Freddie and Fannie. From government to business to consumers, Americans are debtors, and most of the debt has been pissed away on war, sprawl, speculation and corruption, as opposed to building something for the future.

As the economist Nouriel Roubini has pointed out, the current account deficit in the ’90s came back as investment in private innovation, but for the past eight years it has been used to finance deficit spending and debt. Moreover, now much of this debt is held by nations that do not necessarily wish us well, including China and the petro-states such as Saudi Arabia.

This situation dangerously limits our options in foreign policy. It makes it a near certainty that living standards will take a big hit as we have to pay it back. Remember, when the Soviet Union collapsed, the first people in the door were the bankers, wanting to be repaid for the debt the Bolsheviks defaulted on after the 1917 revolution.

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Posted inPolitics: National

Can candidate Hoover fool us again?

John Sidney McCain III said today "the fundamentals of our economy are strong," sounding exactly like Herbert Hoover after the crash of 1929. The parallels are interesting. Republican policies largely caused the Great Depression. Hoover had done honorable and even miraculous work before the presidency (feeding World War I refugees). He was a progressive Republican but became a reactionary. The biggest similarity, besides "the fundamentals" lines, is that the world had passed both men by. The world had become too complex for their remedies or policies. They were/are overwhelmed. Except Hoover didn’t have Karl Rove, "the base" (which interestingly translates in Arabic as al Queda) and so many ignorant, easily led voters.

On the other hand, maybe the key word in McCain’s statement is "our" economy. As in the economy represented by his rich friends and supporters, the nationless corporate oligarchy and his Treasury secretary-to-be, former Texas Sen. Phil Gramm (also prime architect of banking and Wall Street deregulation). He of the "nation of whiners" and "mental recession." For them, the winners at a time when income inequality is worse than anytime since before the crash of ’29, the economy is strong. So maybe unlike his campaign of late, McCain actually spoke the truth.

The recession that’s all in our heads claimed two of the most powerful and influential investment banks in the world over the weekend. Anybody who claims to tell you what will happen next — much less that the worst has passed — is about as reliable as all those telephone mortgage chislers during the housing bubble. What is more clear is how it happened, and, perhaps, some of the ramifications.

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Posted inPhoenix

The Coles affair: Unsustainability is now

Once again, the Wall Street Journal goes to Phoenix to report on the most pathological aspects of our economic troubles. It does the in-depth, sophisticated and contextual story on the suicide of Scott Coles and the collapse of his Mortgages Ltd. that the local press will not allow its reporters the time and expertise to do. And remember, the Republic’s in-house diktat is, "say something positive about the community" (and use streaming video!!).

The personal story of Coles is the stuff of a tragic novel, albeit for our tawdry era. He was 48 when he wrote a goodbye note, donned a tuxedo, climbed into bed, and apparently committed suicide. His company was in trouble, and with it some of the highest-profile projects in "the Valley." His 20-year-younger second wife, whom he had met in Las Vegas, wanted a trial separation. The darkness he must have felt merits our compassion and prayers.

But the business story must also be told, for it illustrates not only how Phoenix got into its worst downturn in perhaps decades, but also the peril of Ponzi Scheme Nation.

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Posted inPhoenix Politics: National

The Republic looks at a tale of three cities

The Arizona Republic’s Chad Graham traveled to Austin and Seattle to report on some lessons recession-slammed Phoenix might learn. Numerous Rogue Columnist readers have asked for my reactions. Chad is a fine journalist and a friend. His story fits into a continuum of sometime efforts by the newspaper to educate the public and policy makers about the real world — this goes back at least to the 1980s. These efforts are ignored as population growth resumes and the nation’s last big factory town returns to churning out suburban tract houses.

The editors tip their hands by, I would assume, inserting this sentence to make defensive "Valley residents" feel better: "Phoenix will never have a gateway seaport to Asia that hums with
activity. Seattle will never have the potential solar power of Phoenix." The sad reality is that the center of solar research, entrepreneurship and use is cloudy Germany. Phoenix literally started the solar power movement in the 1950s and let it get away — therein lies the tale of the town.

Graham’s important point is that Seattle and Austin "have learned the lesson that Phoenix is now being taught: Economic
downturns hit harder when you are overly reliant on one industry."

Rather than go through the story, or even rehash my years of "controversial" efforts to raise these issues, I’d rather make a few key points among dozens that could be discussed. My perspective is as a Phoenician who has lived in Seattle for nearly a year and has seen both close up.

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Posted inPhoenix Politics: National

The recession this time

Another recession, and for many Americans the post-2001 recovery and expansion felt like one long tough slog. It would have felt worse had they been living within their means, but liar-loan mortgages, bottomless credit cards and cheap stuff from China allowed them to think they were rolling in the good times, just like the hedge-fund managers and CEOs.

Another recession, and it won’t be like 2001, when a fraud-driven bubble burst, or 1991, when the savings-and-loan scandal sank the economy. It will have fraud, bursting bubbles and unsustainable finance, to be sure. But it may be far worse than anything we have experienced since 1982, maybe longer.

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