Friday, July 19, 2013

Stimulus and Profits

   News item: The Commerce Department is warning that President Barack Obama "will not sign individual appropriations bills that simply attempt to enact the House Republican budget into law." The department said the House plan will cut $1 billion from the President's request for Commerce Department funding, which would require a halt to investments in areas "designed to help grow the economy, create jobs and strengthen the middle class." Other proposed cuts in the House version would hurt the overall economy. "We cannot cut our way to prosperity," a department statement said.
   Commerce Secretary Penny Pritzker is touring the Western states to drum up more cooperation between business and government to boost economic activity. 

   Other news items: Major banks report big profits, but resist tighter regulation.
   Senators Elizabeth Warren and John McCain move to reinstate Glass-Steagall Act bans on banks acting as both commercial and investment institutions. They were split in 1933 after helping to bring on the Great Depression. The ban was overturned in 1999. Within ten years, America sank into the Great Recession.
   The European Central Bank says it will keep interest rates down to help economic recovery. GDP in its region declined by 0.3 percent in the first quarter, the ECB said. Economic activity in the euro area "should recover in the course of the year, albeit at a subdued pace."
   The International Monetary Fund says an emerging market slowdown is growing more slowly than expected, and is adding to global economic pains. Meanwhile, IMF Managing Director Christine Legarde urges Eastern European countries to work together more closely. (An Eastern European Union, perhaps?)
   Fed Chairman Ben Bernanke again criticizes "strong headwinds" slowing economic recovery because of federal fiscal policy. He tells Congress that Fed monetary policy will continue until recovery is well under way.

   Numbers: Initial claims for unemployment benefits were down slightly for the week ending July 13. The nationwide unemployment rate is 7.6 percent, the consumer price index is up 0.5 percent, and average hourly earnings are up a dime. All numbers from the U.S. Department of Labor.

   Comment: It's time for politicians to get off their oppositional butts, get together and do something. Government is about getting something done. Politics is about making the other guy lose. And sometimes the consequence is that the entire country loses, as one side becomes so fixated on stopping the other guy that nothing gets done.

Thursday, July 18, 2013

Railroads Haul the Future

Note: The following was published in the Fall, 2012, edition of  Phi Kappa Phi Forum, the quarterly journal sent to members of the National Honor Society of Phi Kappa Phi.

A Pivotal Junction for Railroads
By John T. Harding

The term “making the grade” perhaps originated from a freight train’s efforts to reach the crest of a slope. And, like The Little Engine That Could, the American railroad industry is struggling to get back on track to financial strength after decades of stifling regulation, competition from truckers, and the recent recession.
Class I railroads, those carrying freight long distances between major metropolitan areas,
“account for approximately 68 percent of U.S. freight rail mileage, 89 percent of employees, and 93 percent of revenue,” according to the Association of American Railroads (AAR).1More than 560 freight railroads navigate a 140,000-mile system nationwide with some 175,000 employees.2 They annually move 1.5 million carloads of food products, 2 million carloads of plastics, fertilizers and other chemicals, and 7.3 million carloads of coal, among other items.3

Stifling regulation

“By the late 1970s, counterproductive and unbalanced regulation had brought America’s rail industry to the brink of ruin,” AAR explains.4 “Rail bankruptcies were common, and tracks and equipment were falling apart because railroads could not afford the cost of upkeep.”
Things began to improve in the early 1980s when looser regulation enabled marketplace demand to determine routes, services, and prices. As a result, average U.S. freight rates, adjusted for inflation, dropped 51 percent from 1981 to 2010 (based on revenue per ton-mile). “That means the average rail customer today can ship twice as much freight for about the same price it paid nearly 30 years ago.”5 Meanwhile, the industry consolidated from 14 Class I railroads to seven, a process that bolsters the bottom line in any number of ways.

Competition from truckers

For years, freight railroads in America faced falling revenues and declining profits partly because of rising fuel costs and competition from the trucking industry. But through innovations and adaptations, rail carriers have recovered and become the most cost-efficient way to ship goods.
Intermodal transportation, for instance, transfers sealed boxes from ships to trains for long-distance hauling and then to trucks for local delivery. Intermodal and container traffic grew 6.4 percent and 8.9 percent, respectively, last spring from the year before, even as total freight carloads slid 3.48 percent.6 “[B]etter rail service and new intermodal service offerings have resulted in conversions from long-haul trucking to intermodal service that uses railroads for a large portion of the total move,” remarks Standard & Poor’s Rating Services, adding that “trucking capacity is shrinking because of stricter safety requirements … so shippers may turn to railroads to carry cargo containers for segments of lengthier journeys.”7 Moreover, freight trains use “far less energy to move cargo than through trucking.”8   

Recent recession

Railroads, like almost all business sectors, suffered during the national downturn. For example, operating revenues for Class I rail freight lines plummeted from $61.2 billion in 2008 to $47.8 billion in 2009.9 
But an uptick occurred in 2010 to $58.4 million.10Another encouraging economic sign: having the cash flow for building and maintaining roadbeds (unlike in trucking, which utilizes public roads and highways); the railroad industry plans to spend some $13 billion in private capital to improve its infrastructure.11 

Chugging along

Taken together, the rail freight industry is looking to a brighter future as it hauls itself up from a trough. Consider, for example, just two of the seven Class I freight rail carriers. Norfolk Southern, operating approximately 20,000 route miles in the U.S., reported a 17 percent increase in operating revenues for 2011, to $11.2 billion, and net income was $1.9 billion, up 28 percent. And Union Pacific, at 31,900 route miles, reported net income of $3.3 billion for the full year, a jump of 18 percent from the prior year. Operating revenue, the company said, was a record $19.6 billion for the year, up from $17 billion in 2010.
           
Footnotes:
1Association of American Railroads (October 2011). “Overview of America’s Freight Railroads.” Retrieved from http://www.aar.org/~/media/aar/Background-Papers/Overview%20of%20US%20Freight%20RRs%20October%2019%202011.ashx.
2Ibid.
3Ibid.
4Association of American Railroads (October 2011). “The Cost Effectiveness of America’s Freight Railroads.” Retrieved from http://www.aar.org/~/media/aar/Background-Papers/The-Cost-Effectiveness-of-Freight.ashx.
5Ibid.
6“The Zacks Analyst Blog Highlights: Canadian Pacific Railway, CSX, Union Pacific, Canadian National Railway and Norfolk Southern.” (March 12, 2012). Zacks.com, property of Zacks Investment Research, Inc. Retrieved from http://www.zacks.com/pr/71115/the-zacks-analyst-blog-highlights-canadian-pacific-railway-csx-union-pacific-canadian-national-railway-and-norfolk-southern.
7Standard & Poor’s Rating Services. (March 27, 2012). “Infrastructure Spending Keeps Rails and Trucks Moving.” Retrieved from http://mobile.reuters.com/article/bondsNews/idUSWNA349920120327.
8“Recent Performance Review For 5 North American Railroads.” (March 29, 2012). SeekingAlpha.com. Retrieved from http://seekingalpha.com/article/467351-recent-performance-review-for-5-north-american-railroads.
9Association of American Railroads. (June 2011.) “Class I Railroad Statistics.” Retrieved from http://www.aar.org/~/media/aar/Industry%20Info/AAR-Stats-2011-0617.ashx.
10Ibid.
11Standard & Poor’s Rating Services. (March 27, 2012). “Infrastructure Spending Keeps Rails and Trucks Moving.”

Wednesday, July 17, 2013

Yawn

   Stable, moderate, modest, steady, measured. These are some of the words that jump off the pages of the latest Beige Book report on the American economy from the Federal Reserve. There were a few areas that justified the use of terms like strong, increased, expanded, and stimulated. But there were also the words softened, cautiously optimistic, and slow.
   It would probably be unrealistic to expect an official economic analysis to say the status is foggy and the outlook bleak and likely to become worse. A report like that quickly becomes a self-fulfilling prophecy.
   The latest summary, prepared by the Federal Reserve Bank of St. Louis and based on information gathered on or before July 8, is not aglow with optimism, however. "Overall economic activity continued to increase at a modest to moderate pace since the previous survey," the report said.
   Another survey, prepared by the International Monetary Fund, said the U.S. economy is likely to increase by 1.75 percent this year, and is projected to increase its output by 2.75 percent next year, even as growth worldwide remains "subdued."

   Real estate people, however, perennially an optimistic bunch, see a pickup coming as they look at improving sales of new and existing homes. A REAL Trends market report said housing sales in June were up 10.2 percent from a year ago, and the average price of homes sold rose by 7.8 percent.
   That report, released today, joins earlier reports from builders, sales agents and lenders, all of whom see a brighter future for the industry.

   Taken together, however, official reports from government sources call for more a more cautious outlook. Regardless of attempts to pump up individual sets of numbers, the overall economy has not yet awakened.

Tuesday, July 16, 2013

Growing Pains

   That's the title of the latest update from the International Monetary Fund on the World Economic Outlook. In short, don't look for much change.
   For the year, the IMF said global growth will "remain subdued" at slightly above 3 percent, the same as last year, and less than forecast when the Outlook was issued in April. "Fiscal consolidation" -- read: less government spending -- will continue to hold back growth, and emerging market economies, which depend on the bigger spenders, will suffer more as interest rates rise.
   And as the U.S. unwinds its monetary stimulus, as the Federal Reserve has suggested several times recently, money mavens will look elsewhere to stash their cash, the IMF hinted.
   Capital controls, rules that prevent cash from leaving a country, have already hurt some countries -- Cyprus is the latest example -- and this will hurt emerging market economies even more, along with rising interest rates.
   A "more protracted recession" in the euro area, which could even worsen, will also contribute to slower performance. Activity in the euro area is expected to contract by half a percentage point this year, the IMF said, and will rise to just under 1 percent in 2014, "weaker than previously projected."

   As for U.S. Gross Domestic Product (GDP), it grew by just 1.8 percent in the first quarter of this year. Initial estimates for the second fiscal quarter -- April, May and June -- are expected to be announced July 31 by the Commerce Department's Bureau of Economic Analysis.
   Home builders, meanwhile, are gaining confidence. An index of confidence among those who build single-family homes rose six points to 57, the third consecutive monthly gain and the strongest reading since January, 2006. That from the National Association of Home Builders, who released the results of the monthly survey today.
   The NAHB credited increased confidence among buyers, and a sliding availability of existing homes for sale.
   The National Association of Realtors (NAR), for its part, said sales of existing homes continued to rise, as well as prices. And the NAR's chief economist, Lawrence Yun, warned that "unless new home construction ramps up quickly," prices will continue to rise. In May, the median home price rose at a double-digit pace from a year ago, the NAR said.
   However, as mortgage rates rise and unemployment remains a serious question, applications for home loans, both for purchasers of new homes and for existing homes, are declining, according to the Mortgage Bankers Association (MBA).
   It's a complex picture, one that can be hard to grasp. Why, one might ask, should I care about international developments when I'm trying to focus on a job and buying a house? Because, the answer comes back, we live in an international economy, and what happens in one nation could easily affect the prospects of another.
   As the poet said, "No man is an island."

Sunday, July 14, 2013

Media Comments

   Some comments have come in about recent postings. On the Media Memo, the current administration is zealous in going after leaks, and news outlets are feeling the brunt of "a heavy hand of government." Sometimes, the cloak of anonymity is the only way to get information critical to a story. Journalists on occasion need this method, and should not give in to government pressure, "even if it means going to jail."
   The New York Times reported July 12 that under the Obama Administration, "prosecutors have filed charges in seven leak-related cases to date, compared with three under all previous presidents combined."
   Attorney General Eric Holder says investigators will back off, following stricter guidelines issued Thursday. We'll see.
   While all this kerfuffle is going on about leaks and confidential sources, keep in mind that politicians have long used "leaks" to reporters to float an idea and determine what reaction it would have if actually introduced. That way, if the trial balloon bursts, the politician can deny ever having said it. On the other hand, if the idea gets a favorable public reaction, the official can proceed and claim credit for introducing it. Both sides win, sort of. The journalist gets a scoop, and the politician escapes injury if the idea falls flat.
   
   Also, on the reaction to the data scooping, "It's not just France that has a problem," another correspondent writes. Across Europe there are data protection laws which prevent the holders of information about individuals from sharing that information with anyone. France may simply be the first to start the legal process."

   So is Edward Snowden a spy or traitor for releasing details of the snooping program to journalists, or a man of principle who sacrificed a great deal? Consider this: A spy would have sold the information to a foreign government, taken the money and gone to ground to live out his life in anonymous luxury. Snowden did not. He went public, and is now a man without a country, job or family, and facing criminal charges. Many have already decided what he is. More detail, however, continues to become available, so it may be a good idea to withhold judgement.

Saturday, July 13, 2013

Media Memo

   Question: When and how is it OK for government to track news reporters in its efforts to gather evidence and prosecute wrongdoers?
   Put another way, is the news media an investigative arm of the government?

   Supposedly, reporters notes cannot be subpoenaed and reporters can't be ordered to reveal their sources. This is true in many states, but there is no federal shield law protecting reporters. Even so, on the state level many reporters avoid the problem by not saving their notes. That way, if they are called to testify, they can stand by what appeared in print, and as for anything else, they don't remember. Some police do something similar; once an investigation is complete and written up, notes are destroyed.
   So to get around a legal ban on rummaging through a reporter's notes and research materials, including phone records and email messages, the FBI has labeled a news reporter a co-conspirator, and therefore fair game for prosecutors.
   In this reporter's experience, it was pointless to ask the FBI for information on a particular story. The standard response was, "We never comment on investigations. We don't even acknowledge that there is an investigation. So tell me, what do you know?"
   This reporter's answer: "I'm not an investigative arm of the government. Anything I do know you can read about in tomorrow's paper, along with everyone else."

   For some lawmen, however, that's not enough. They want to know a reporter's sources, as well as information that was not printed, speculative and otherwise, as well as why a reporter chose not to use it.
   In short, they want to recruit news reporters into becoming researchers and investigators -- willingly or otherwise -- for prosecutors. And one way to do that is to threaten and/or charge reporters as co-conspirators -- accuse them of being part of a criminal enterprise, since they know something about what's going on. In recent years, this was a common tactic used as part of government efforts to find and plug leaks. (Politicians like to control the message and the information flow.)
   Leaks and confidential sources have long been standard in the news media tool kit for uncovering stories that expose political goofs. And government types are equally adept at finding ways to cover themselves. Some of these ways, however, cross a moral, if not a legal, line and become unconstitutional. Some grossly so, by nature of being secret.
   
   Thus it was with the National Security Administration. In its zeal and in the name of national security, the NSA would scoop up myriad amounts of information, including the number and duration of telephone calls made from one location to another, the number and types of email messages -- text and graphic as well as video -- from one user to others, and look for patterns that would, they hoped, reveal potential terrorist suspects. And that's the program that was exposed by news reporters, who were given the information by an NSA contract employee named Edward Snowden.
   The Administration claims it was not monitoring phone calls or reading email stuff, especially that stuff sent by American citizens, except if it was going to or from countries and regions that potentially harbored terrorists.
   There's an awful lot of ifs, excepts, unlesses, potentials and maybes in there. And now, the Attorney General, after all the flap about the exposure of the governments super dooper scooper snooper program, says the government is revising its guidelines as to what and how the FBI can deal with reporters in its leak-plugging efforts.
   Naughty, naughty, says the boss. Don't do that again. Here's how you should do it, if you really need to. So if you don't trust the traditional news media accounts of the government's new plan, you can read the new guidelines for yourself. It's called the "Report on Review of News Media Policies." It's dated July 12, 2013, and it's available on the Department of Justice web site. Here's a link: http://www.justice.gov/opa/pr/2013/July/13-ag-783.html. This displays a statement by Attorney General Eric Holder on the release of the report, and carries a further link to the report itself.

   As for the privacy issue, and whether government has any business, right or duty to monitor citizen communication and /or to encourage members of corporate America to provide their data stock to the scoopers, consider this: Europeans have long had a practically inbred suspicion of anything that smacks of secret police activity, and efforts to get folks to fink on their neighbors. There is such a thing a privacy, they say. And in France, officials are considering lawsuits against American data companies that give stuff to the U.S. government about French citizens. This violates French privacy laws, they say.
   So the French are mad as hell, and they're not gonna take it any more.

   And they're not the only ones. Ask people in Germany and those from the former Soviet countries about secret police.
   It can't happen here, you say? On the contrary, it can, and very nearly did. And not just in fiction.

   Finally, keep in mind this blogger's motto: Belief without thought endangers freedom.

Friday, July 12, 2013

Lawyers

   A lawyer's job is to defend the client, and a lawyer will often say the darnedest things in an effort to discredit responsibility or fault for a client's alleged actions. And in doing so, it seems lawyers want jurors who are intelligent but don't think. That is, they are smart enough to understand what the lawyer is saying, but not so smart as to see through the smoke.
   Herewith, some comments on the trial of George Zimmerman in Florida.

   There is no question that Zimmerman shot teenager Trayvon Martin; that was acknowledged early on, when the community security guard described the shooting to police. When charged with murder, Zimmerman pleaded self defense, relying on Florida's "stand your ground" law. During summation, the defense lawyer argued that a person need not actually be in danger, but only that the person fear he be in danger. That, the defense said, is enough to justify shooting someone, in self defense. The defense lawyer, while acknowledging that the teenager was unarmed, noted that he did have a weapon -- the sidewalk and his fists, which supposedly were used to inflict head injuries on Zimmerman.
    Other experts have pointed out that while on the telephone to a 911 operator, Zimmerman was told not to follow the person he felt was "up to no good." Instead, legal analysts say, the appropriate thing to do would be to walk away. Call police, and stay away. Let law enforcement officers deal with a situation that may -- or may not -- be dangerous.
   However, Florida law says a person is entitled to "stand your ground." But discretion is often a wiser course. 

   Meanwhile, the jury retired for the day Friday evening, and was scheduled to resume deliberations Saturday morning. One charge is murder. An alternate is manslaughter. At issue is whether Zimmerman was justified in the shooting because he feared he was in imminent danger, and therefore was not guilty.
   Either way, Zimmerman is not likely to be able to stay in the same town. If guilty, he goes to jail. If not, he may have to deal with irate citizens, or leave town to start over elsewhere with a new identity.

----

   Addendum: By Saturday evening, July 13, 2013, the verdict came in. Not guilty. Both sides presented their cases, the jury deliberated and decided. It's time to respect that verdict.