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Journal Sentinel misleads on stimulus

The Milwaukee Journal Sentinel sank to new lows in covering economics with an inaccurate and sensationalist front page article on the American Recovery and Reinvestment Act's job creation record.

The headline blared "Economists see no stimulus jobs."

Journal Sentinel economics reporter John Schmid wrote: "... more than two-thirds of economists responding to a a nationwide survey say the stimulus so far has failed to create jobs."

This was awful reporting on several levels.

First and foremost, it is dead wrong.

There is virtually no dispute among economists that the stimulus prevented the worst recession since the Great Depression from getting much worse by slowing the rate of job loss and saving between 1.6 and 1.8 million jobs.

The New York Times economics columnist, David Leonhardt, effectively refuted Schmid, in a column the MJS buried (on page 7 in Sunday's edition) when he wrote:

Just look at the outside evaluations of the stimulus. Perhaps the best-known economic research firms are IHS Global Insight, Macroeconomic Advisers and Moody’s Economy.com. They all estimate that the bill has added 1.6 million to 1.8 million jobs so far and that its ultimate impact will be roughly 2.5 million jobs. The Congressional Budget Office, an independent agency, considers these estimates to be conservative.

Before the stimulus was passed the nation was losing an average 650,000 jobs a month. It is widely recognized that the "widely successful "cash for clunkers" and the mortgage rebate program shave have stimulated automobile and home purchases saving thousands of jobs. Other stimulus projects have accelerated shovel ready projects and kept or put construction workers to work.

The recession began in December 2007, during President Bush’s 7th year in office. By the time President Obama was inaugurated, 4.4 million jobs had been lost. By the time the Recovery Act was passed, 5.9 million jobs had been lost. As the graph above illustrates, the job losses that were accelerating before the Recovery Act was passed have been virtually eliminated.

We should not forget the damage done to the economy before the Recovery Act. From December 2007 to March 2009, one out of every twenty private sector jobs was eliminated, a rate of destruction 50% greater than even the severe recession in the early 1980s. The economy was in a free fall. With unemployment at 9.7% today, and a record 40% unemployed for more than six months, it’s hard to appreciate how much more damage the stimulus investments prevented.

Without the two million jobs generated by the Recovery Act, the unemployment rate would now exceed 11% rather than the 9.7% rate in January.

Schmid not only misinformed his readers about the stimulus bills' impact, he also misrepresented the survey. It did not ask whether the stimulus had created jobs, but whether it had created jobs "in their firm or industry."

That's a distinction with a world of difference.

The decision to make a minor survey of a handful of business economists the lead article on the front page was a decision with real consequences. The publics' perception of the Recovery Act's effectiveness bill will shape future federal economic policy decisions including:

• Will unemployment benefits be extended for the more than two million people who are about to run out of them?


• Will the feds provide additional job training dollars so the unemployed can acquire the training they need to get back on their feet?


• Will Congress provide financial assistance to the states which face a $357 billion budget shortfall and local governments with an additional $80 billion budget deficit? Without it, state and local governments will be forced to slash spending, laying off police officers, firefighters, teachers, and other public employees or raise taxes to balance their budgets, threatening the nascent recovery.


• Will Congress provide additional health care funding so that's states don't raise eligibility limits or cut programs?


• Will Congress invest in repairing our national infrastructure, our schools, highways, the electric grid, water systems, ports, dams, and levees which must be upgraded, rebuilt or replaced if the U.S. is to remain a first class economy in the Twenty First Century?

The American Recovery Act helped reverse the nation's economic free fall, even if it wasn't large and targeted enough to stimulate a robust recovery. The economy is showing signs of life, but it remains on life support.

Private demand, consumer spending and private investment remain anemic. The only engine of growth and employment remains public demand. Without an accurate analysis of the Recovery Acts positive results, public opposition will grow, fanned by partisan opposition, and Congress will retreat from making the strategic investments our nation needs to revive the economy.

That's the real story. And its the story John Schmid and the Milwaukee Journal Sentinel missed.

Milwaukee's brand-inner city evictions

A few weeks ago the Milwaukee Common Council voted to establish a committee to assess public perceptions of Milwaukee and develop a brand to promote the metropolitan area.

The task force better get to work before our well-earned reputation as a city that's tough on poor folks generates any more publicity.

Today's New York Times has a feature article and the accompanying photo on evictions in Milwaukee.

It reports:

On Milwaukee’s impoverished North Side, the mover’s name (Eagle) is nearly as familiar as McDonald’s, because Eagle often accompanies sheriffs on evictions. They haul tenants’ belongings into storage or, as Ms. Smith preferred, leave them outside for tenants to truck away.

Here and in swaths of many cities, evictions from rental properties are so common that they are part of the texture of life. New research is showing that eviction is a particular burden on low-income black women, often single mothers, who have an easier time renting apartments than their male counterparts, but are vulnerable to losing them because their wages or public benefits have not kept up with the cost of housing.

And evictions, in turn, can easily throw families into cascades of turmoil and debt.

Just a few years ago we were told that w-2 would help break the cycle of poverty and enable poor parents to become self-sufficient.

The promises are long forgotten. Many of the politicians who made them have retired or returned to lucrative private life. But the havoc they wrought remains.

Skilled labor decisive in attracting green jobs to Milwaukee

It's great news that Ingeteam, the Spanish energy service firm that builds wind turbine parts, has decided to build its first U.S. factory in the Menominee Valley Industrial Center.

There are several reasons to be excited about this development:

1) Ingeteam will create sorely needed manufacturing jobs in Milwaukee. It is projected that when its factory opens in January 2011 it will employee 50 to 60 people. By 2015 it could an additional 250 workers. This investment won't solve Milwaukee's monumental unemployment problems, but these will be value added, full-time jobs with benefits, far better than adding another health club or Walmart with their low-paying, part-time employment.

2) Ingeteam is an energy technology firm whose components are found in 12% of all wind turbines. Its decision to locate in Milwaukee is a boast to the region's effort to become a center of green and advanced manufacturing.

3) In a city where the organized business community has been vocally opposed to a paid sick leave law that was overwhelmingly approved by the voters, Ingeteam appears to be family friendly. On their web site Ingeteam lists as one of its values: "Conciliate work and family life: provide opportunities and flexibility in working days and hours, etc., to conciliate work life and family life. Special priority should be given to maternity, by providing support measures."

The political spin over Ingeteam's decision has already begun.

Both leading candidates for Governor, Mayor Tom Barrett and County Executive Scott Walker inaccurately attributed Ingeteam's decision to tax cuts.

The Barrett campaign released a statement declaring Ingeteam's decision:" shows the success of Tom's philosophy of tying tax cuts to jobs."

Walker, not to be outdone, strayed even further from reality arguing that Ingetam's decision validated his staunch anti-tax position.

But it turns out that tax breaks weren't decisive. As Thomas Content and Tom Daykin report in today's Milwaukee Journal Sentinel:

"The key differentiator for Milwaukee: its labor force. In particular, Milwaukee had far and away the most people employed in the making of electric motors, the province of local firms including Rockwell Automation Inc. and New Berlin's ABB.

"Southeastern Wisconsin has a history and legacy of manufacturing here that a lot of people are down on," said Darin Buelow, a principal at the Chicago office of Deloitte Consulting LLP, Ingeteam's site-selection firm. "(Building) motors is something that this area does really well, and this is something that Ingeteam wanted us to look for.'"

It was Milwaukee manufacturing and technical labor force, largely a product of our public schools, tech colleges and universities, all taxpayer financed institutions, and our industrial know-how that attracted Ingeteam and its jobs. Ingeteam acknowledged this in its press release: "... the Milwaukee area boasts prestigious universities with some of the highest-ranked engineering departments in the country, offering specific courses in renewable energies, which will be highly useful when it comes to finding specialized staff."

If the Milwaukee area is going to compete for green energy and advanced manufacturing firms and employment, it will not succeed by getting poor, by competing on the basis of low-cost labor and reduced public investments.

There will always be states and nations where people will work for much much less. Think Bangladesh or Shri Lanka.

Milwaukee, the region and our manufacturing firms need to compete based on our strategic advantages, skilled labor, industrial know-how, network of suppliers, supportive academic institutions like MATC, UWM and MSOE, efficient transportation and communication systems, access to fresh water, high quality service, quality and productivity. Those are the region's strengths and our competitive advantage. And that's why Ingeteam will be in the Menominee Valley and not the Mississippi Delta.

Coalition for MPS responds to Journal Sentinel

Bob Peterson and Wendell Harris, co-chairs of the Coalition against the MPS Takeover, have an excellent opinion piece in Sunday's Milwaukee Journal Sentinel. It is linked here.

Transportation Subsidies

Daniel Peterson has an excellent Crossroads piece that exposes the hypocrisy of those who oppose freight and passenger rail investments even as other more costly forms of transport feed at the public trough.

Peterson writes:

If it's the subsidy of rail transportation that you oppose, then philosophical integrity requires that you also oppose subsidies for the trucks, barges, buses and airlines that compete with rail. Something more to think about: Railroads are four to five times more fuel efficient for moving freight than are trucks. And just one freight train with two crew members moves the equivalent of 400 semis with 400 drivers (which drain public coffers because "...one 80,000-pound truck does the same road damage as 9,600 automobiles.").

Money follows efficiency unless artificially tampered with, and so my assertion is that if the competing non-rail modes of transportation had not been artificially supported via massive subsidies, the private railroads in the U.S. would still be operating tens of thousands of miles of now abandoned rail lines.

Privately operated intercity and intracity passenger rail service might still be viable, as it was prior to the "freeway" system. Most freight would be on the rails instead of clogging up the roads, so we would have needed far fewer roads and lanes on expressways. And, therefore, our taxes would be significantly less today.

Oh, and that estimated $18 billion to expand one airport? Less than half that amount would build a high-speed rail network connecting Chicago-Milwaukee-Minneapolis, Chicago-St. Louis, Chicago-Indianapolis and Chicago-Detroit.

The article is linked.

Obama defends CEO bonuses & bank bailouts

Paul Krugman reports:

The lead story on Bloomberg right now contains excerpts from an interview with Business Week which tells us:

President Barack Obama said he doesn’t “begrudge” the $17 million bonus awarded to JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon or the $9 million issued to Goldman Sachs Group Inc. CEO Lloyd Blankfein, noting that some athletes take home more pay.

The president, speaking in an interview, said in response to a question that while $17 million is “an extraordinary amount of money” for Main Street, “there are some baseball players who are making more than that and don’t get to the World Series either, so I’m shocked by that as well.”

“I know both those guys; they are very savvy businessmen,” Obama said in the interview yesterday in the Oval Office with Bloomberg BusinessWeek, which will appear on newsstands Friday. “I, like most of the American people, don’t begrudge people success or wealth. That is part of the free- market system.”

Obama sought to combat perceptions that his administration is anti-business and trumpeted the influence corporate leaders have had on his economic policies. He plans to reiterate that message when he speaks to the Business Roundtable, which represents the heads of many of the biggest U.S. companies, on Feb. 24 in Washington.

Oh. My. God.

First of all, to my knowledge, irresponsible behavior by baseball players hasn’t brought the world economy to the brink of collapse and cost millions of innocent Americans their jobs and/or houses.

And more specifically, not only has the financial industry has been bailed out with taxpayer commitments; it continues to rely on a taxpayer backstop for its stability. Don’t take it from me, take it from the rating agencies:

The planned overhaul of US financial rules prompted Standard & Poor’s to warn on Tuesday it might downgrade the credit ratings of Citigroup and Bank of America on concerns that the shake-up would make it less likely that the banks would be bailed out by US taxpayers if they ran into trouble again.

The point is that these bank executives are not free agents who are earning big bucks in fair competition; they run companies that are essentially wards of the state. There’s good reason to feel outraged at the growing appearance that we’re running a system of lemon socialism, in which losses are public but gains are private. And at the very least, you would think that Obama would understand the importance of acknowledging public anger over what’s happening.

But no. If the Bloomberg story is to be believed, Obama thinks his key to electoral success is to trumpet “the influence corporate leaders have had on his economic policies.”

We’re doomed.