Wednesday, February 9, 2011

Yet more HSR smoke and mirrors from Washington

The minute my back is turned!  I go away, off-line for just a few days, and the Administration comes out with what is a stunnlngly bad idea. 

The President is proposing an addition to the Transportation budget which has been in a state of suspended animation for some time.  He wants to add $53 billion for rail projects, both regular and high-speed.  It's a lot of money, more than before, but it's still suggests the peanut-butter metaphor.  Spread it around over as many states as possible, and in that way, support all the local Democrats for their re-election campaign rhetoric in 2012. "Look at all the jobs we created."

Of course the Republicans won't stand for that multi-billion dollar waste, and the White House knows it. So, it's yet another empty gesture to show that this Administration is doing something about unemployment.  And, you better believe that the unemployment barometer will be the telling indicator about whether Obama gets re-elected or not.  Also, it will drive the make-up of the next Congress.

I wouldn't be bitching and moaning about all this had the White House said, "We are going to provide stimulus support for American's ailing and failing urban and regional public mass transit systems." Of course, I would have also expected them to make some conditions for those projects, such as. . . streamline their operations rather than just their hardware, and make them far more convenient and commuter friendly than they are presently.  But, that's another discussion.

Perhaps the principal issue, besides the terrible financial aspects of high-speed rail (if you like black holes, you will love this project), is the employment picture that state and local elected politicians paint for you when discussing this project and why it's justified.

One of the biggest promises of the high-speed rail project in California is jobs.  This is the Democratic drum-beat and this is why the Democrats relentlessly ignore all the short-comings of the CHSRA despite having those problems put in the spotlight by numberous state government and academic agencies and organizations. What’s HSR about for the Democrats?  The economy and jobs.  For the Democrats, none of this money will be wasted since they believe that it will filter into the economy one way or another, legitimately or illegitimately. 

The promised job numbers are astounding.  The numbers go up and down like a thermometer, but Wikipedia sports 150,000 construction jobs and 450,000 permanent jobs. How absurd is that?  Do they mean 150,000 construction man/years over ten years? Because that's not the same as employing 150,000 people.  There are several dollar-to-people ratios floating around that are always dragged out to make a compelling case for a huge government project.  They are not to be believed.

Then, where did the rail authority ever think of jobs as “permanent?” Don’t they read the newspapers? American jobs are no longer 'permanent.'  "Permanent jobs" in the US has become an oxymoron.

Even teacher tenure is under fire. 'Tenured' state employees are being laid off.  Most of those jobs that are promised by the HSR will be temporary.  After all, they are government jobs for the construction, and those so-called 'permanent jobs' will be few and far between.

The American manufacturing and service sectors are doing the least amount of hiring possible, and most of that is overseas. That is why there is an economic “recovery” at the top of the US economy and a Depression at the bottom where the surviving workers and the rest of us live.

Let’s sum up the situation about HSR by saying there are a number of myths that the rail promoters and their worshippers would have you believe.  One of them is about the plethora of jobs just waiting for those federal dollars to make them possible. I should remind you that in California, those dollars won’t become available until construction begins in the Central Valley and that’s not for another two years, the end of 2012, if then. And, co-incidentally, that's election time.

Furthermore, many of the ARRA stimulus funds will be headed overseas (along with most of our jobs). The US has no HSR manufacturing capacity and no HSR construction skills and expertise.  Like everything else, we’re going to have to buy this from overseas like we do everything else.

Posted: February 6, 2011 08:17 PM
Once again, the job numbers are dismal. In January, the U.S. economy created just 36,000 domestic jobs, far below the roughly 145,000 that economists had forecast. The unemployment rate fell, to 9 percent, but only because more and more discouraged workers are giving up and leaving the workforce.

The U.S. still has a jobs gap of about 14 million jobs, and that number is increasing as the labor force grows. Counting people who've given up, or who are working part time when they want full time jobs, the real unemployment number is around 17 percent. America now has about 25 million people either out of work or underemployed.

Meanwhile, corporate profits continue to set records. Profits in the third quarter of 2010 were 1.659 trillion, about 28 percent higher than a year before, and the highest year-to-year increase on record.

What's going on? Very simply, America's corporations no longer need America's workers.
As Harold Meyerson documents in a brilliant piece for The American Prospect, our most admired corporations -- GE, Apple, Hewlett Packard, Intel -- are creating ever more jobs overseas and relatively fewer at home. This has the double benefit of taking advantage of cheap labor abroad and disciplining workers to accept low wages at home. Along with the high unemployment rates have come declining earnings. Meyerson writes:

"In 2001, 32 percent of the income of the firms on Standard & Poor's index of the 500 largest publicly traded U.S. companies came from abroad. By 2008, that figure had grown to 48 percent."

This record contrasts dramatically with that of the right's favorite whipping boy -- Western Europe. Germany is gaining jobs at a rapid clip. Its industrialists are committed to producing at home, and just in case they get ideas of making outsourcing a way of life, they have strong unions who negotiate agreements on where production is located.

Germany's labor costs are the highest in the world, but Germany nonetheless runs the world's largest export surplus -- 7 percent of GDP -- while America runs chronic trade deficits.

Barring drastic policy changes, our jobless recovery is likely to continue. There are three parts to the problem.

First, while the economy is still in deep recession, both the administration and its Republican critics are already talking about steeper budget cuts. President Obama talks a good game about infrastructure spending, but it's hard to see where the funds will come from as deficit hawks in both parties prevail.

In Sunday's New York Times, Jacob Lew, the president's budget director, wrote a depressing (in both senses of the word) oped piece on the case for deeper budget cuts. In theory, massive infrastructure spending could create a lot of good jobs, but the Obama budget is likely to offer new spending at token levels to prove his good faith as a deficit-hawk, and the Republicans will likely deny him even that.

Then there is the problem that Meyerson nails. The Obama administration is not about to take issue with American companies that profit from locating ever more production abroad. The corporate elite is fiercely opposed to any limits on its freedom to relocate, and Obama is on a mission to make peace with big business. The administration continues to promote "free trade" deals on the premise that they will create jobs -- but more and more of those jobs get created offshore.

Both political parties are in denial about the plain fact that American industry is competing against an industrial system in China radically different from our own. If a company like GE wants to operate in China, the Beijing regime extracts conditions that violate the spirit if not the letter of the World Trade Organization.

Companies are made to take on Chinese partners, to transfer sensitive proprietary technology, and to shift their production and R&D to China. In exchange, they get government subsidies and docile workers. Eventually, much of their production is displaced by their Chinese partners, but in the meantime they make a lot of money.

In the past two decades, company after company concluded that the U.S. government didn't really care if we lost our manufacturing base. The Chinese government was making them an offer they couldn't refuse, so one by one they made a separate peace with Beijing.
At the latest U.S.-China summit, there was clucking about its overvalued currency, though last week the Treasury, out of solicitude for the feelings of Beijing's leaders, once again declined to name China as a currency manipulator.

But the overvalued Renminbi is a sideshow. The main game, which even relative hawks in the U.S. government just won't raise, is China's rigged industrial system. Why won't American officials go there? Because American corporations have adapted just fine.

Finally, there is the service economy. As many defenders of off-shoring have pointed out, even if Apple produces most of its products in China, a lot of the value-added stays in the U.S. Apple sales create jobs for workers in retail stores, warehouses, and shipping, as well as a relative handful of elite software and hardware designer jobs, not to mention corporate profits.

Swell, but in the absence of a labor movement, or higher minimum wages, or other pressure for decent retailing wages, the service economy is turning into a Wal-Mart economy, where domestic service jobs that are created mostly pay lousy wages.

These alarming job trends were not caused by the financial collapse that began in 2007. Rather, the prolonged recession revealed deep structural changes in the U.S. economy that reflect a gross imbalance between a corporate elite and ordinary working people.

So if you want to know why the Democratic Party did so badly in the 2010 midterms, it's because the administration lacked a plausible story about how to alter these basic dynamics. 

And it lacked that story because it was unwilling to challenge the corporate business model that disdains American workers. In light of that reality, the latest gestures by the president to show the business elite just what a good fellow he is are not just disappointing, but they are foolish politics.

The president's approval ratings may be up slightly in the wake of the Tucson shootings. The attack gave Obama an opening to shame the Republicans for their shrill partisanship and to model civility. But high-minded gestures will not cure the jobs crisis. The 2012 election will be won or lost in the industrial heartland, where states like Michigan, Ohio, Wisconsin, Missouri, and Pennsylvania are devastated from the recession, and whose jobs are not coming back as long as current policies continue.

There is a whole other strategy available for dealing with the jobs crisis -- a constructive economic nationalism. But neither the White House nor the Republican opposition is offering it.

Robert Kuttner is co-editor of The American Prospect and a senior fellow at Demos. His latest book is A Presidency in Peril


The New York Times

February 8, 2011

Administration Pitches Big Rail Projects

The Obama administration, whose efforts to bring high-speed rail to the United States were sidetracked by Republican governors in a couple of states, pressed ahead with its vision of building a national rail network on Tuesday when it called for spending $53 billion on passenger trains and high-speed rail projects over the next six years.

The proposal, made by Vice President Joseph R. Biden Jr. at 30th Street Station in Philadelphia, would move the country closer to the president’s goal of making high-speed rail accessible to 80 percent of Americans within 25 years.

But it comes as President Obama’s efforts to bring bullet trains to America have gone from the “Yes We Can” optimism of his campaign slogan to the less certain “I think I can, I think I can” of a certain storybook train engine. Newly elected Republicans governors have halted new rail projects, and a new Republican majority in the House has questioned the administration’s rail strategy.

Many rail proponents cheered the proposal, especially the idea of making rail a regular part of the nation’s transportation program so that long-term projects could be planned without uncertainty over whether money would be available later.

Mr. Biden cast it as an investment in the future. “As a longtime Amtrak rider and advocate,” he said, “I understand the need to invest in a modern rail system that will help connect communities, reduce congestion and create quality, skilled manufacturing jobs that cannot be outsourced.”

But Republicans were wary. They have questioned the projects the administration selected for the $10.5 billion in rail money that has been approved so far, noting that much of it was spread around to conventional train service and questioning the suitability of the two true high-speed projects that are included: a relatively short 84-mile line in Florida connecting Tampa and Orlando, and a stretch along the California Central Valley that would eventually be part of a line from Los Angeles to San Francisco.

Representative John L. Mica, Republican of Florida and chairman of the House Transportation and Infrastructure Committee, expressed “extreme reservations” about the proposal. “This is like giving Bernie Madoff another chance at handling your investment portfolio,” he said in a statement.

Mr. Mica favors high-speed rail but would prefer to direct the money to the corridor that links Washington, Philadelphia, New York and Boston. “Rather than focusing on the Northeast Corridor, the most congested corridor in the nation and the only corridor owned by the federal government, the administration continues to squander limited taxpayer dollars on marginal projects,” he said.