Sunday, September 30, 2007

Budget crisis -- the kids are counting on you

Even if the legislature can manage some sort of budget resolution in the eleventh hour tonight, eight months of political game playing, postponing, stalling, bickering, heel digging, posturing, neglect, irresponsibility, and dereliction of duty have left a permanent stain on Michigan and her people.

Today, a friend confided that her son -- a very bright, promising high school student -- read an account of the budget dealings in Lansing and said, "Mom, Michigan sucks."

The budget crisis -- an historic and monumental embarrassment -- has demolished this young man's sense of pride and honor in his state. He's the kind of kid we want to educate well and keep in Michigan, but he'll probably attend college elsewhere and never return. Why should he?

He is bright enough to see that the legislature is populated by politicians more concerned with winning elections than responsible stewardship of the commons. He knows that schools have not yet received funds they were due months ago and that these funds were part of a sleight of hand balancing illusion. He understands that his access to education was considered potentially expendable in a high stakes game of chicken. Why on earth would he want to stay here?

Michigan has always been his home, but how welcoming can it feel tonight, as the prospect of government shutdown hangs over his home?

Good luck, legislators. The kids are counting on you.

Friday, September 28, 2007

The shutdown -- it's personal and political

I started this blog for two reasons: to seek understanding and to offer hope. Neither seems within reach as the legislature bickers itself toward irrelevance and the government toward shutdown.

If the legislature cannot resolve this issue by Sunday, Governor Granholm can assert executive authority and declare a fiscal emergency, according to an analysis by Patrick Anderson, a former deputy state budget director, in consultation with analysts from the Citizens Research Center, Michigan Chamber of Commerce and public schools and universities. (source)

That might not be such a bad option. The analysis says she would have authority to:

• Outline a limited spending plan.

• Assure creditors the state is not bankrupt and would pay its bills.

• Announce automatic, temporary extensions of state registrations, permits and licenses.

Too bad Governor Granholm can't also lay off the House and Senate without pay, rather than 35,000 state workers who actually deliver necessary services to the people of Michigan.

Partisanship hurts Michigan economy -- both sides in tax debate agree

(cross-posted at Michigan Messenger)

Activists and experts with differing views on taxes agree on one thing: Lansing partisanship hurts Michigan's economic prospects.

Rose Bogaert, chair of the Wayne County Taxpayers Association, has been fighting tax increases in Michigan for 30 years and believes strongly in her cause. "We are way behind other states in terms of economic development partially because we're unable to change things in Lansing. I don't care -- Democrat or Republican -- we need to do something to bring about change in this state," she said.

Some experts believe that bipartisan tax policy -- even if it involves a tax increase -- attracts business because it has more staying power."If you have decisions made on a bipartisan basis, chances are they will be more durable over time and you'll know what the ground rules are for investing in the state over the long term," said Paul Hillegonds, who served as president of non-profit Detroit Renaissance from 1997-2005.

"To the extent that policy is partisan and swings back and forth as the partisan winds change, economic development becomes less predictable. That makes a state very unattractive," said Hillegonds. "In the end, economic development is not a partisan issue."

A number of regional economic development organizations pursue their work without involving state government. "These are bipartisan efforts that include business trying to come to grips with this transformational economy," said David Hollister, executive director of Prima Civitas, a non-profit economic development organization. "They are trying to find ways to wrestle with it outside of the political process."

Prima Civitas works to build collaboration among disparate community groups. Hollister said, "The whole idea is stewardship -- putting the interest of the community first and building collaborations."

"There are so many pieces and it's all based on enhancing the general good and doing it without the legislature. We try to keep them informed, but as far as our strategy it's just not even in the equation," Hollister said.

To be sure, the two sides still differ over taxes. Tax foes argue that higher taxes drive away new business; economic development experts contend that increasing taxes will attract new business investment.

Bogaert and other anti-tax activists believe new taxes enable government waste and that the burden on taxpayers is high enough. They are frustrated and concerned that economically stressed people may face a higher tax burden.

Economic development experts say investment in public infrastructure and talent requires new revenues. "No one is going to invest in a state that does not invest in itself-no one. It's impossible to invest in talent with a cuts-only approach to finances," said Bill Rustem, president and CEO of Public Sector Consultants.

Still, the two sides do agree that the continued political bickering hurts the economy.

Consumer sentiment holds steady in September, UM reports

The final September University of Michigan consumer sentiment index has held steady at 83.4.

Mr. Greenspan pitches his book

Former Federal Reserve chairman Alan Greenspan is on the book circuit pushing his memoir, The Age of Turbulence: Adventures in a New World. He's popping up all over the place offering advice and placing odds on everything from inflation (it's going to accelerate) to recession (more likely than one would want). (source)

Actually, he's changed his mind on recession. On September 12 he put it at 1 in 3. Today, he says just less than 50/50. One recalls Jimmy the Greek in advance of a fight or Monday night football.

He's criticized President Bush and Republicans:

"Little value was placed on rigorous economic policy debate or the weighing of long-term consequences," he said.

He has cautioned against abrupt Federal Reserve rate cuts:

Greenspan said the Fed should be careful not to cut rates too aggressively because the risk of an "inflationary resurgence" is greater now than when he was chairman, the Financial Times reported.

And in some quintessential Monday-morning quarter backing, admits the global credit crunch was well in view on the horizon for some time:

"We did know what was going on and the reason we didn't stop them was that to a large extent these types of questionably egregious actions are taken by people who have their own money invested," he said. (source)

You mean like average homeowners, who in good faith put their own money down for mortgages and find themselves flipped because property values are falling? What about the egregious actions of disreputable lenders pushing loans onto people who couldn't afford them in order to feed the insatiable appetite for potentially high-yield securities?

Well, we're all adults here and it is a new world; Ben Bernanke is chairman now. And he preferred the risk of doing too much to doing too little on interest rates. (source) A man of action almost as daring as Indiana Jones.

Partial government shutdown imminent

What more can be said? The legislature has had nearly eight months to do its work. Partisanship and politicizing the commons have utterly crippled the legislative process. With a shutdown, the Legislature cannot perform oversight in numerous areas. Important committee work has been canceled for the last two weeks and will not resume until after a shut down. For example, hearings on predatory lending in the House are on hold indefinitely. Meanwhile, foreclosures are ripping through communities and devastating families.

What's worse, our partisan Legislature communicates to the rest of the world that Michigan is a bad investment risk. Not because we are fiscally challenged, but because we are unable to collaborate and to create sound public policy in our own best interest as a state. We apparently lack the will to help ourselves.

Politicking is easier than governing. Running for office is easier than carrying out legislative duties--just as getting pregnant is far easier than raising a child.

Without substantive change to tax structures and government programs, this will happen again.

Wednesday, September 26, 2007

Preparing for September Consumer Confidence Number

It's been a heck of a month. Let's review:

1. August orders for durable goods take their biggest decline in seven months. (source) 9/26/7

2. Existing home sales drop for the sixth straight month in August reaching the lowest rate of sales in five years. (source) 9/25/7

3. The Conference Board consumer confidence index dips to a 2-year low. (source) 9/25/7

4. Crude oil tops $84 per barrel. (source) 9/20/7

5. U.S. dollar and Canadian dollar hit parity for first time in 30 years. (source) 9/20/7

6. Fed cuts interest rates for the first time in four years. (source) 9/18/7

7. RealtyTrac reports foreclosures jumped 36% in August. (source) 9/18/7

8. Crude oil hits record $80 per barrel. (source) 9/13/7

9. U.S. payrolls decrease by 4000 instead of increasing by the expected 110,000. (source) 9/7/7

10. GM announces fourth quarter production will be cut by 10% in response to weak August sales in a tightening credit market. (source) 9/4/7

Bank of America to release 1500 Michigan workers

Detroit News reports:

"Bank of America Corp. will close its $21 billion deal to purchase LaSalle Bank next week, a move that will trigger the beginning of 1,500 layoffs of LaSalle workers in Michigan over the next two years."

Lawrence Di Rita, a spokesman for Bank of America, headquartered in Charlotte, N.C., also said with respect to customer experience,"There are typically hiccups along the way, but we try to minimize them. There is no reason to believe this won't be a smooth transaction."

Do you suppose the 1500 lost jobs will be experienced by the workers as mere "hiccups along the way?" Will their children who experience disruption in home life and stressed parents find the circumstance a mere inconvenience, a blip in the grand scheme of their formative years?

Well, that's not Bank of America's problem. In the last two weeks Bank of America announced it was raising ATM fees for non-Bank of American customers in order to provide better service to its own customers. How about sending a small portion of those fees to a fund for displaced Bank of America workers to assist with transition to some other knowledge-based, new economy job?

Tuesday, September 25, 2007

Budget gridlock: are term limits to blame?

cross posted at Michigan Messenger

As the budget embarrassment continues, people across Michigan's political spectrum blame term limits for the intensification of partisanship and profound legislative dysfunction in Lansing. According to Republican and Democratic veterans of Michigan government, term limits have led to ineffective working relationships, a devaluing of public service as a career, and set a focus on running for office rather than governing.

"Term limits don't work, not as short as they are in Michigan. Would you go to a doctor and ask for someone only if they have less than four years experience? Government is complicated," said Bill Rustem, president and CEO of Public Sector Consultants.

"I never liked the idea of term limits in the first place. They've turned out worse than I expected in terms of their impact on the process," said Paul Hillegonds, vice president at DTE who served in the Michigan House from 1979 to 1996. "The artificial term limits make it difficult to deal with complex issues. It sometimes takes a long time to work through an issue. Today you pass the baton before you get halfway through the issue."

Strong working relationships across party lines brought budget resolution in 1983 when Michigan faced a more extreme fiscal crisis than the current one. "I was in state government in the early 1980's when unemployment was 17.5% in some parts of the state. We rallied in a bipartisan way to solve that budget crisis," said David Hollister, who served in the Michigan House from 1973 to 1993 and is executive director of Prima Civitas.

"I think, especially in the House, limiting a person's tenure to six years just isn't enough for people to develop relationships," said Hillegonds.

Michigan's term limits, among the nation's most restrictive at 6 years in the House and 8 years in the Senate, match those in California and Arkansas. Enacted in 1992, they came to full effect in the House in 1998 and the Senate in 2002.

Hollister says bipartisan collaboration was possible before term limits because legislators took time to develop friendships across party lines and shared a commitment to public service as a career. "I have wonderful friends in the Republican party. We served together. We traveled together and socialized. I continue to treasure their friendship. Those kinds of relationships are just not there anymore."

"People saw 20 years in the legislature as positive public service," Hollister said.

Connecting lack of collaboration and the current crisis Rustem said, "The only way things really get done in the political process is through accommodation--finding a common interest between people and building from there. That's what our legislature isn't doing."

Hillegonds sees the problem in an even deeper way--working across partisan difference can help a legislator mature as a policy maker. "With relationships comes a broader perspective. When I first went into the legislature, I had some preconceived ideas, but as I developed relationships and worked through problem solving my perspective broadened. And I think my view of economic development and other issues changed over time."

"I think the best representation is a combination of listening to your constituents, but also informing your constituents about the complexity of issues that goes beyond geography or the predominant philosophy. If a representative can have that dialog with constituents and grow in their own view of the world over time, I think the process turns out better," said Hillegonds.

But in an environment of nearly perpetual election cycles and a focus on winning, that depth isn't possible. The minute legislators "hit their seat they're running for something else. They get into the House and they're running for the Senate. Or they are running for judge or attorney general or governor or county commissioner," Hollister said.

Acknowledging the impact on voter sentiment, Rustem said, "People across Michigan are getting rightly angry at the partisanship. And they should. They should look at candidates running for office and ask are you ready to do something for Michigan or are you just going to worry about the winners and losers in the political sphere."

"It used to be you got involved in party politics to run for office; now you run for office to get involved in party politics. It's backwards. It needs to change," said Rustem.

Sunday, September 23, 2007

Grover Brought the Kool-Aid

Grover Norquist, anti-tax ideologue, is reported to have pitched rebranding the Michigan GOP as an anti-tax party at this weekend's Mackinac gathering. And, reportedly, it met with thunderous applause.

The fiscal situation in Michigan is complex. That is why Norquist's idea can hold sway; it appeals to the intellectually lazy. The economic transformation happening in Michigan is overwhelming. In order to understand this transformation, its relationship to state finance and how to move Michigan to the next place, you have to do some homework. Lots of brilliant people have worked to explain it. For example the Citizens Research Council generously provides a power point presentation on our crisis, updated on September 7, laying out the cold hard facts. (See also: Michigan's New Economy--Basic Reading List)

Let's put this in perspective. Michigan is just a week away from a government shutdown. Certain GOP strategists want a shutdown. This is the ugly side of politics. The people advocating government shutdown are playing politics with the operation of the commons. They have contempt for We the People of Michigan. They cannot be concerned for Michigan's future, only their own electoral prospects.

What's worse, they are being used by outside forces hoping to deliver Michigan to a GOP presidential candidate.

GOP legislators, who tasted and enjoyed Norquist's Kool-Aid, must certainly be ignorant of the fiscal facts in Michigan. How else could they assent to his irresponsible, single issue grunt? It's quick. It's easy. And it's dead wrong.

Saturday, September 22, 2007

Loonie Greenback Parity--kids' stuff

For the first time in 30 years, the Canadian and U.S. dollars are at par. This is good news for Michigan tourism, but not such good news for Michigan kids hoping to stretch an allowance dollar on Canadian souvenirs.

Many of us in Michigan remember family vacations where the exchange rate seemed a magical thing. We could buy many strange and wonderful souvenirs over the border with our powerful American allowance money. Remember rubber band guns and enormously fat pencils and mini banners and deerskin pouches? You might as well just go to a tourist trap up north for those goodies at this point. While Michigan kids' allowances will buy less over the border, Canadian children can finally experience the upside of fluctuating exchange rates.

More significantly, Michigan can expect an influx of Canadians flexing their greater loonie power. That's a good thing for tourism. According to George Zimmermann, vice president of Travel Michigan, "Visitors spend about $17.5 billion annually, which employs 193,000 people statewide and contributes $971 million in state taxes.”

Wednesday, September 19, 2007

Mr. Franklin's advice for Michigan

"An investment in education pays the best interest."
Michigan's future depends on an well-educated populace. Companies in knowledge-based enterprises are attracted to where there are smart, educated people. Phil Power has something to say about the partisan wrangling impeding our way forward and developing our talent.

"Beware of little expenses. A small leak will sink a great ship."
A latte here, a bagel there. Well, it's a little different in government, but the principle applies. Michigan's budget has a long-standing leak (more of a gaping hole actually) called the structural deficit. It cannot be fixed through new revenues or tax cuts alone or together. It's much bigger than that. And there is no more extra money to stuff into it. To move forward will take cuts, new revenues and structural changes. It's a case of "both and" not "either or."

"We must, indeed, all hang together or, most assuredly, we shall all hang separately."
The budget crisis and the fight for Michigan's future economic wellbeing are beyond partisanship. There is a We in this, We the People of Michigan. Not just We the Democrats or We the Republicans. There are progressive, reasonable people in both parties. Just as there is counter-productive ranting on both sides. John Bebow has something to say about this Partisan Cancer.

"Life's Tragedy is that we get old to soon and wise too late."
It's a little like the current life cycle of a Michigan legislator. Just when you figure things out and understand the system of government from the inside, it's time to leave and never return. Currently, 15 states have term limits. Ours match those of California and Arkansas--6 years in the house and 8 years in the Senate.

"If passion drives you, let reason hold the reins."
Go ahead, pursue the public good with all your heart, but don't forget to consult your brain every inch of the way. Over simplifying with a single issue cripples the governing process. John Bebow weighs in on the MTA recall campaign.

Monetarists to the rescue--update

According to BBC, the Fed rate cut has perked up markets around the globe. Traders are smiling for the first time in weeks.

"In Europe, London's FTSE 100 was 2.3% ahead by 0940BST while France and Germany's key markets were up about 2%.

Japan's Nikkei index closed up 3.7% while Hong Kong's Hang Seng index climbed 4.2%.

The Fed cut its benchmark federal funds rate from 5.25% to 4.75%, sending US shares up sharply."

Tuesday, September 18, 2007

Monetarists to the rescue

Today the Fed cut it's discount rate by 50 basis points to 4.75%.

The Globe and Mail reports that the Loonie is already within a cent of the Greenback.

The International Herald Tribune reports that the Bank of England doubled loans to British banks--$8.8 billion at 5.75%.

The real question is whether the Japanese housewives moonlighting as currency speculators will finally be able to relax after doing the dinner dishes.

Monday, September 17, 2007

Today's budget impasse began in 1983

If you thought this mess in Lansing had something to do with the 2008 budget, you would be wrong.

In 1983, on the heels of a budget crisis worse than this one, two Democratic senators were recalled. This action flipped the Senate from Democratic control to Republican control.

Future governor John Engler became the Senate majority leader and ran the GOP as a sort of opposition party. Sound familiar? He then became governor running on a platform of budget cuts and tax cuts. He lived up to his word demanding cuts in spending and taxes for the 12 years he was in office. The legislature borrowed from the right hand to give to the left until there was no more money. In the meantime, the auto industry, our life blood, began to decline-but that's another story.

The important thing is that obstruction and ideological resistance to any revenue increases resulted in GOP electoral success. And this is the point we must remember today.

Mr. Drolet remembers. Recall 1983 is the rallying cry of the Michigan Taxpayers Alliance, headed up by Mr. Drolet. It suggests there can be a glorious reliving of the sad triumph of 1983 and that it would be good and right to pursue recall actions against legislators who vote to increase revenues.

He and his organization categorically oppose tax increases. MTA's board includes Grover Norquist, most frequently quoted as wanting to "drown government in a bathtub." This is called ideology, not public policy.

Institutional memory is a casualty of term limits. No one in the legislature was present for the drama of 1983. But they need to review history to appreciate the drama they're caught in and act intelligently on behalf of our state and our future. Good luck.

House Banking Committee to examine mortgage lending

cross-posted at Michigan Messenger

Legislators are taking on predatory lending in Michigan, but can they eliminate questionable practices that pervade the mortgage industry and laid the foundation for the subprime mortgage crisis? A house committee will hear testimony Tuesday from representatives of the agency that oversees mortgage regulation in Michigan.

House Banking and Financial Services Committee Chair, Rep. Andy Coulouris said, "Tuesday's hearing will lay the groundwork for the debate on how we deal with foreclosures and predatory lending practices in Michigan. We're going to get the lay of the land from state regulators. We want to know what is happening--what regulations are working or not working and what do we need to do to step up enforcement."

House Democrats announced late in August that they would be crafting new legislation to address predatory lending in Michigan. As part of that process, the House Banking and Financial Services Committee will hear testimony from Michigan's Office of Financial and Insurance Services (OFIS) Commissioner Linda Watters, Chief Deputy Commissioner Fran Wallace and Kirt Gundry, Director of Mortgage Examinations and Investigations.

OFIS's work is vast and its effectiveness frustrated by an insufficient number of examiners; unclear jurisdiction; and the lack of education standards, practice standards and licensing for loan officers. Industry standards are so lax you could be a janitor one day and a loan officer the next.

According to OFIS, there are over 3200 companies making mortgages in Michigan. OFIS has 13 full time examiners. Prior to last year, it had only 6.

Depending on a lender's corporate structure, OFIS may not have jurisdiction over an institution creating mortgages. This April, in Watters v. Wachovia the U.S. Supreme Court ruled that state-chartered subsidiaries of national banks are exempt from state regulation. OFIS Commissioner Watters had advocated for state regulation of state-chartered subsidiaries. Numerous organizations filed amicus briefs, as well as every state attorney general in the nation (including Washington D.C. and Puerto Rico). Unfortunately, for consumers, the Court ruled against the state.

OFIS licenses entities--companies or sole proprietors, usually LLCs or corporations, due to liability issues. Loan officers work for licensees; there are no standards for loan officers.

Many in the industry blame unscrupulous loan officers for pushing expensive mortgages onto unqualified borrowers. But companies share some of the blame having created incentives like "yield spread premiums" that reward loan officers for getting well qualified borrowers into unnecessarily expensive loans. As far back as 2004, the Center for Responsible Lending estimated that yield spread premiums cost borrowers $2.9 billion per year nationally.

With ample blame to go around, complicated laws and regulation in flux at the federal level, Michigan's lawmakers will need to take extra care crafting effective legislation to curb predatory lending.

Sunday, September 16, 2007

Michigan is home to 10 of Inc.'s 500 fastest growing companies

Given that Michigan was the only state whose GDP moved in reverse from 2005-2006, news of 10 companies growing by leaps and bounds is astounding.

Inc. Magazine features an interactive search feature with their top 5000 as a data set. You can search by company name, state, industry, revenue, NAICS code, number of employees and more.

The ten Michigan companies in the top 500 are:

24e-IT Professionals
49Piston Automotive
104Environmental Services of North America
West Bloomfield
403American Laser Centers
Farmington Hills
417Salamander Technologies
Traverse City
420Menlo Innovations
Ann Arbor
455L&R Construction Services
457Big Communications

Partisan split on tax increases in Lansing overnight

According to MIRS, the partisan impasse in Lansing continues to thwart any progress toward solving $1.75 billion shortfall in the 2008 budget. As the October 1 deadline approaches, Republicans entrench with the single issue of no new revenues. The political dysfunction in Lansing is an embarrassment.

We're running out of time and metaphors. What do the legislators most resemble? Children in a playground scuffle? Siblings fighting over the bigger dessert? Religious extremists whose faith is strengthened in the face of persecution? Starving plane crash survivors with no more rations?

Fortunately, no one has pulled a pistol to threaten a duel, although that option looks more effective than anything happening this weekend at the statehouse.

Here's another option: receivership for the state.

The city of Highland Park is currently functioning under this arrangement. If our state legislature cannot address administrative and fiscal issues in a functional manner, perhaps an independent third party can. Bring in Warren Buffett's team.

Dogmatic adherence to cuts only and no increase in revenues would never fly in a corporate environment--unless it were a hostile takeover.

Saturday, September 15, 2007

British bank run update

The Guardian Unlimited reports ("Fears grow for British economy as panic over Northern Rock spreads") in tomorrow's edition that:

"US Treasury Secretary Hank Paulson flies in to London tomorrow to discuss the worsening global credit crisis with Chancellor Alistair Darling, as fears intensify that the lending squeeze could be the last straw for Britain's buy-now-pay-later economy."

What is Mr. Paulson going to advise? He represents the world's leading buy-now-pay-later economy. Our economic growth has been predicated on debt for years. It's how we sustain the illusion of middle-class expectations and upward mobility. You get to pretend you own stuff and that you have earned stuff, in exchange for accepting all sorts of systemic injustices and thwarted opportunities. It's our national devil's bargain.

What can the British possibly learn from us? Perhaps Mr. Paulson will advise how to calm the sensibly alarmed Brits with some rhetorical strategies tying economic stability to consumer spending and attitude.

Even now, credit card companies are ramping up sales pitches to subprime borrowers, while cutting back on offers to good credit risks.(source) They can make so much more on people who carry a balance and accumulate late payment fees. In this financially twisted environment, it's good business to lend to people who have little to no hope of paying back their debts. It's 21st-century servitude to a monstrous and invisible master.

Welcome aboard good people of Britain. Teach us that panic may be a reasonable response to fiscal irresponsibility.

Brits have a bank run

What is the a logical outcome of unscrupulous mortgage lending practices in Michigan? More foreclosures? Yes. Sagging house values? Yes. Tightening global credit market? Yes.

A good old fashioned bank run in Britain? Well, by extension, yes. The bank's problems are blamed on the ongoing global credit crunch that has its roots in subprime lending in the U.S.

BBC reports today that over the last two days, Northern Rock customers have queued up and waited for hours to withdraw funds from bank locations across the country.

"Banking sources suggest that on Friday alone clients pulled out £1bn - or 4-5% of retail deposits."

That's $2 billion in one day.

Friday, September 14, 2007

Ann Arbor Pioneer High School Football on a Friday Night

Ann Arbor 58, Lincoln 13

Ann Arbor Pioneer High School's Hollway Field looks down on University of Michigan's Big House from the south. Claiming some of Ann Arbor's highest ground, several stadium light poles double as cell phone towers.

Tonight the brisk northwest wind evoked October in the UP or perhaps a summer dip in Lake Superior. It was cold, really cold. The band was great and the home team won.

An entire parking lot at the high school was cordoned off for tailgaters spending the night before tomorrow's University of Michigan--Notre Dame match. Large, fully appointed RVs filled the lot looking like a beached fatty seal herd.

Tomorrow will bring barbeques heaped with meat products, drink cozies snuggling beer, street vendors with knock-off block M merchandise, and ticket scalpers.

Pioneer High School profits from its proximity to the Big House. The school provides parking for hundreds of cars and safe space for revelers every Michigan home game. We take it for granted, but shouldn't.

Our students' graduation rate is among the highest in the state, as is their rate of college admission. These are hard working kids with a lot of advantages, all things considered; but they are not unscathed by the economic realities of today's Michigan.

Their parents work hard and stress over paying for college while saving for retirement. A number of them were employed at Pfizer, a larger number, in the auto industry. Many are successful professionals striving to provide every advantage for their children. And some live in subsidized housing.

Tonight, all was well at Hollway Field. Kids cheered on their classmates. Parents cheered their kids. And the band rocked the house, punctuating touch downs with funk. They'll be playing Carnegie Hall in the spring.

Consumer Confidence--Preliminary September Number

Despite a softening housing market, increases in foreclosures, the first decline in U.S. payrolls in four years, job slashing in the mortgage industry, and the dollar hitting a record low against the euro--consumer sentiment seems to be holding steady at 83.8 mid-month, compared to 83.4 in August, according to the University of Michigan/Reuters survey of consumer sentiment.

My car, my self--buying American in a global economy

cross-posted at Michigan Messenger

In Michigan, identifying with a car company can be like claiming an ethnicity. People boast, "we're a GM family" or "I'm from a Ford family." These loyalties have ripened over generations of auto industry employment and are rooted in the days of American auto manufacturing dominance.

There really was a time you could be sure a car was American-made (in the U.S.A.) from bumper to bumper.

In today's global production environment, cars are evaluated for "domestic," not American, content. The October Chicago Fed Letter titled "Whose part is it?-Measuring domestic content of vehicles" (by Thomas H. Klier and James M. Rubenstein) examines how the federal government determines domestic content of vehicles sold in the U.S. and the factors influencing the ultimate mix of materials.

There are actually three methods in place to determine whether a car can be called "domestic."

EPA calls a vehicle "domestic" if at least 75% of its content is produced in North America, including Canada and Mexico. The Department of Treasury, Customs Service uses the benchmark of 50% U.S. or Canadian content. The American Automobile Labeling Act (AALA) of 1992 calls a vehicle domestic if 85% of its parts originate in the U.S. or Canada. In addition, those parts must have 70% of their content from the U.S. or Canada.

The domestic/foreign distinction has become very, very blurry.

"You can't just look at the badge on a hood and think that gives you an accurate representation" of the car's origin. "You have to look at it on a model by model basis," said Bernard Swiecki, senior project manager with the non-profit Center for Automotive Research.

"The Chrysler 300C has been held up as the return of the traditional American sedan, with rear-wheel drive, V8 engine, aggressive styling, and muscle. But the car itself is built in Canada. It has a Mercedes designed transmission and the hemi engine is actually built in Mexico," he said.

"The Honda Accord is a Japanese automaker's vehicle. But certain configurations have an American transmission and engine and are built in Ohio."

The Fed Letter reports that the 2006 Honda Accord was 70% domestic, while the 2006 Ford Mustang came in at 65% domestic.

Like a nutrition label, the AALA label is there to help you decide what to buy based on your values, not just your appetite.

The AALA requires manufacturers to disclose where vehicles are assembled, where engine and transmission originate, and--in cases of less than 85% domestic content--the two foreign countries contributing the highest amount of content. This is on the same label that lists emissions and gas mileage data.

If you don't want to read the label, but still want a statistic to buttress your loyalty consider this: in 2006, 96% of vehicles sold in the U.S. by the Detroit three were assembled in North America.

Most vehicles sold in the U.S. by the Detroit three are still American-made--North American-made, that is.

Tuesday, September 11, 2007

Pies and Politics in Lexington, Michigan

Navy veteran, Mary Salmonowicz has been selling pies from her home in Lexington, near the shore of Lake Huron, for 22 years. When you walk into her small kitchen, the smell of fresh baking compels you to breathe deeply. But before you can enter, a hand-made sign grabs your eye.

Next to a picture of President Bush, a wordy, but direct message:
“Iraq Security ‘We can take care of ourselves.’
Iraq’s government said on Friday morning we’re taking a month break from our duties because it’s too hot. Mr. President, bring our troops home now. Iraq doesn’t need us. They don’t want us. We need our troops here. Quit playing with our military and our life and our money just because you can. Grow up.”

Her Dutch apple, cherry crumb and red raspberry pies with their light, flaky crust entice customers who disagree with her politics. “If people don’t like my sign, they just come in, get their pie and leave,”she said.

61-year-old Salmonowicz began her pie business after leaving nursing. “I just jumped in and did it. I had no idea what I was getting into.” Within ten days of quitting her job, she set up a separate kitchen at the back of her house, obtained licensing from the Michigan Department of Agriculture and started baking.

She had been a visiting nurse for private agencies, but became disillusioned as profit grew more important than quality of care. “The agency would receive a specific amount per case. If you closed the case before all the money was spent, that extra money went to the agency. There was a pressure to rush, get the patient done and get out of there.”

She tried a return to nursing five years ago, but found the demands on her time crowded the pie business. She keeps her nursing license current and imagines a kind of nursing that would emphasize patient comfort. “I would start a new type of nursing–comfort nursing. If patients are comfortable, truly cared for, and someone listens to them, they are happy. They heal faster.”

Caring for people motivates Salmonowicz’s pie baking. “I do this because I love to please people. If it pays the bills that’s all I ask.” Her customers come in for conversation as much as pie. “Sometimes I feel like bartender,”she said.

With her retirement approaching, she is making an instructional DVD of her pie making technique for her customers, and perhaps a broader audience. “A lot of people have told me they’re going to be unhappy when I retire, so I decided to make this DVD.“

This summer, Salmonowicz’s business seemed a bit slower. She says fewer visitors are coming up from metro-Detroit and attributes this to the shrinking auto industry and high gas prices. “People are selling their cottages because they have to, not because they want to,”she said.

Fortunately, her business does not depend solely on tourism. In the fall, winter and spring she bakes sirloin pasties, which she boasts “are better than anything over the bridge.” The Mackinac Bridge, that is.

Located at 5846 Lakeshore Rd. (M25) her hours are: Friday 11-4 p.m., Saturday 11-3:30 p.m. and Sunday 11-4 p.m.

Monday, September 10, 2007

DSO Contract--A Victory for Unions and the Arts

Playing in an orchestra is a rush. You are part of something bigger than any individual participant. In the best moments, there is intuitive agreement about phrasing, dynamics, tempo and expression. Your tone contributes to an idea that could never be produced by one person, yet reaches a hall full of individual listeners. Those listeners can become party to the wonder of collective expression, transported by the sheer sonic force moving air that surrounds them. Their appreciation is measured by a quick hushed silence, a collective gasp, before applause.
Unions are probably like orchestras, for some people.

Today, the Detroit Symphony Orchestra and the Detroit Federation of Musicians released elements of a labor agreement that reflects the times. While the agreement keeps the DSO in the top ten highest-paid U.S. orchestras, musicians did make concessions--3 unpaid weeks in the first year of the contract, 2 unpaid weeks in the second year, reduced pension options for new hires, and player contribution to health costs.

The Free Press reports that "musicians’ total minimum compensation"will increase "by 3.6% to $104,650 in the final year." While this may sound a princely sum to a city full of people facing hard times consider this: it is harder for a musician to land a seat in a world class orchestra, than it is for a college basketball player to go pro. Don't be fooled. $104,650 is a reasonable sum.

Related posts:
Music, Prosperity and Legislative Priorities
Great Arts State?
Michigan Arts Funding--From 4th to 50th

Sunday, September 9, 2007

Hundreds Gather for Progressive Policy Summit in Lansing

Stewardship, transformation and hope emerged as key themes yesterday at the Michigan Policy Summit in Lansing. Hosted by Michigan Prospect, the event gathered hundreds of activists and concerned citizens from around the state with the purpose of drafting action plans for health care, clean energy and education.

David Hollister, Executive Director of Prima Civitas, summarized the economic and cultural challenges facing Michigan. Hollister served as a state representative, mayor of Lansing and director of the Michigan Department of Labor and Economic Growth. He assured participants that Michigan is "not facing a fiscal crisis," but rather a crisis of "political will." Hollister presented challenges and opportunities for Michigan. Among the challenges, an aging population, accelerating technological change, and "devolution in decision making" rendering the state processes nearly "irrelevant."

Among areas of opportunity and hope--the research corridor of University of Michigan, Wayne State and MSU; the 21st Century Jobs Fund; MSU President Simon's vision for a "World Grant Philosophy" in higher education; and the Venture Michigan Fund.

Keynote speaker, Donna Brazile, encouraged participants to move beyond single issues and build alliances among disparate groups and issues. Advocating inclusion, she said that working across interests will require trust and compromise. Progressives must "fight cynicism and negativity with hope for all."

She counseled,"Do not grow weary in doing good for in due season we shall reap if we do not lose heart." Yes, that's scripture--Galatians 6:9.

Saturday, September 8, 2007

Housing Advocate ACORN Releases Report on Predatory Lending

The Association of Community Organization for Reform Now (ACORN) has released a report titled "Foreclosure Exposure: a study of racial and income disparities in home mortgage lending in 172 American cities".

Using data gathered according to the Home Mortgage Disclosure Act, ACORN concludes that "unaffordable loans disproportionately impact minority and low- and moderate- income families and neighborhoods."

The report examines patterns of lending among minority populations compared to affluent white populations. It concludes that:

"Nationally, African-American home purchasers were 2.7 times more likely to be issued a high-cost loan than white borrowers. Latinos were 2.3 times more likely to be issued a high cost home purchase loan than white borrowers. Similarly, for refinance loans, African Americans were 1.8 times more likely to be issued a high-cost loan than whites. Latinos were
1.4 times more likely to be burdened with a high refinance cost loan than white homeowners."

According to the report Detroit ranks first for risk of foreclosure.

Friday, September 7, 2007

Truth is Stranger than Fiction--Economic News this Week

Looks like maybe we're not in a one-state recession anymore.
U.S. payrolls decreased by 4000 instead of increasing by the expected 110,000. It's the first drop in four years.(source)

More job cuts in the knowledge-based financial sector.
Countrywide Financial, the biggest U.S. home lender will downsize 12,000 jobs (1/5 of its workforce) over the next three months. (source)

Denial runs as deep as your credit limit.

August back to school spending was brisk. (source)

Your credit limit may be increasing if you are a particularly bad risk, through the generosity of credit card companies.
Direct mail credit card offers to subprime customers were up 41 percent in the first half of this year, compared with the first half of 2006, according to Mintel International Group.(source)

Do these things taken together make any sense?

Next Friday will bring the University of Michigan Consumer Sentiment Preliminary Number for September. It's anybody's guess.

Thursday, September 6, 2007

Real Economy versus Banking Sector

On any day, you can find contradictory predictions for the U.S. economy as the subprime debacle expands. Yesterday, the Fed seemed to be saying,"Don't panic. The difficulty is limited to housing." Today, Federal Reserve Governor Randall Kroszner remarked that "Turmoil stemming from subprime mortgage delinquencies could dampen demand for homes and ultimately slow U.S. economic growth."(source)

Now here's the best part from the Reuters article:
"Kroszner, cautioning that his remarks were intended to be a survey of academic research rather than a commentary on the current financial situation, said crises in the banking sector can lead to disruptions in the real economy."

The banking sector versus the real economy? I suppose the real economy is where human beings do things like live and eat and work. You don't actually need currency to do those things. You could barter, raise your own food and use passive solar power. That would obviate the need for a banking sector. The fact is we have developed to a point where most aspects of what we do are financialized.

If you thought your house was primarily the place you live, you were wrong. When you "bought" your house (if you have a mortgage), the transaction created a debt instrument, which was turned into an investment vehicle, which became someone else's gamble. You happen to live there, but it was never merely your home. It was a poker chip among millions of tiny little poker chips on an earth-sized virtual game table.

No matter how much money central banks give troubled lenders, real people are in real pain in the real economy. The real economy is where human beings are hungry and homeless and sick. It is where people feel ashamed at being laid off or falling behind on the bills. It is where parents feel devastated at not being able to buy kids a new outfit for the first day of school. And they may even blame themselves for not earning enough at a poverty-wage-paying, real-economy job.

Will the subprime crisis reach beyond the housing sector? It already has. GM is cutting back fourth quarter production 10 percent in anticipation of lower demand. (source)

And ponder this, the financial sector is a huge part of the much vaunted "knowledge economy." Any room for fairness or compassion as we move forward?

Thursday Morning News Round Up

Michigan Cyber Safety Initiative--Attorney General Mike Cox announced a new program to teach kids about internet predators. Staffers from the Attorney General's office will train teachers in the program this fall.

Detroit Free Press--"A study by the Michigan Association of Home Builders found that 1.35 million Michigan households, or 35%, can afford only homes priced under $100,000, yet the average price was $139,155 in June." Be sure to scroll down in the article for a very enlightening graph displaying how many Michiganders can afford how much home. Shocking numbers.

Detroit Free Press--Nurses at Detroit Medical Center have been attempting to form a union since February.

Detroit News--Attention, bargain hunters. Chrysler announced six-year, no interest loans to stimulate sales. "The six-year loans are available to buyers of the Dodge Grand Caravan, Chrysler Town & Country long-wheel-based minivan, Dodge Dakota, Dodge Durango and Chrysler Aspen, Pinter said. Five-year loans, which began in May, are offered for purchases of the Jeep Liberty, Jeep Grand Cherokee and Chrysler Pacifica."

Globe and Mail--"Pending sales of existing U.S. homes plunged by a record 12.2 per cent in July, and private employers hired the fewest workers in more than four years in August, according to reports released yesterday."

Guardian Unlimited--"Updating its half-yearly forecasts for the global economy, the Paris-based Organisation for Economic Cooperation and Development added to growing pressure on the Federal Reserve to ease the pressure on US borrowers when it meets later this month." Translation: Experts abroad are very concerned about ongoing problems stemming from the subprime crisis.

New York Times--"Stocks slip as Fed says credit crisis is contained." Translation: We mustn't panic.

Tuesday, September 4, 2007

Early Michigan Primary--Bipartisan Agreement on Renegade Scheduling

Finally, something Michigan Republicans and Democrats can agree on.

National leadership for both parties says there will be a price to pay for this renegade scheduling. And Michigan is one of at least 7 states poised to break the rules. So why have they done it?

In their own words...

From Governor Granholm's press release:
'"An early Michigan primary can lead to greater emphasis on issues that matter to all Americans,' Granholm said. 'We want candidates to talk about how they plan to enforce trade policies that are so critical to our manufacturers, the need for universal access to affordable health care, and how they plan to reduce our nation's dependence on foreign oil. In short, Michigan voters want to hear how every candidate will confront the issues that are so critical to our state and that he or she will face as president.'"(source)

Our issues are America's issues. We will help shape the debate.

From Senator Bishop:
"As I said last week, an early primary will allow all Michigan voters - not only political insiders - to exert early influence in the presidential nomination process. A primary election, in which all qualified voters can participate, will have much higher turnout - and more legitimacy - than a party caucus or convention." (source)

Greater voter participation is a good thing for the process.

From State Rep. John Proos on August 30:
"Michigan has always been a key state for candidates seeking to win the presidency, and now more than ever we need to highlight the fact that Michigan remains a strong battlefield in the '08 election. By holding an early primary election, candidates will flock to Michigan - bringing with them millions of dollars in campaign expenditures that will boost our economy." (source)

Face it, we're perceived as a swing state, a battleground. We can at least support tourism with an influx of candidates, entourages, and reporters.

Unfortunately, Democratic candidates have pledged not to visit us rule breakers. There is fear of insulting voters in Iowa and New Hampshire. There is an etiquette to this, after all.

New Hampshire goes first because it has a law that says it must. They are legally compelled to be first. New Hampshire goes first as a matter of state pride. It is also a matter of national ritual. Groundhog Day tells us about Spring's arrival and the Macy's Parade on Thanksgiving tells us it's time to shop for the holidays. New Hampshire's primary reminds us that the candidates must ask for our votes and that voters get to evaluate candidates.

Regardless of the timing of Michigan's primary, our pressing issues remain. The potential glitz and glamor of early campaigning won't fix: 2008 budget, ever increasing college tuition, workforce displacement, downward pressure on wages, high unemployment. If the legislature could muster the same bipartisanship over our budget, an early primary will have been worth any loss of delegates.

Monday, September 3, 2007

Michigan Democrats, the World is Watching

Finally, we're in the international news and it isn't some embarrassing story about a cat lady or wrongly delivered Chinese body parts. Nor is it merely a sad accounting of our economic losses. It does, however, predict electoral fallout from Democrats' disunity around primary scheduling.

The International Herald Tribune reports (Politicus: Democrats can't count on a flummoxed Midwestern electorate) on the morale and condition of our electorate and speculates that our frustrated populace may not elect a Democrat in the 2008 presidential election, in part because front runners have pledged not to campaign here if we "break" the rules and have an early primary.

And guess who gets the last word in the piece? Mr. Anuzis, of course:

"The Democrats lose in 2008? Saul Anuzis, the Republican Party chairman in Michigan, could only gloat. 'I'm doing cartwheels,' he said. 'There's nothing more the Republicans could ask for in Michigan and nationally.'"

So there you have it--Democrats in conflict and Republicans ready to win. How about Democrats ready to win and Republicans in conflict?

Sunday, September 2, 2007

Washtenaw and Oakland Counties --Tops in Information Technology

Washtenaw County and Oakland County have earned honors from the Center for Digital Government for exceptional use of information technology.

Oakland placed sixth for communities of 500,000 or more and Washtenaw placed sixth for communities of 250,000 to 499,999 residents.

Community governments are rated based on responses to a survey from the Center that evaluates "more than 100 measurements and data points about online service delivery, infrastructure, architecture and governance models."

Mortgage Defaults in Britain Create Micro-Markets of Decline

Michigan may be one of the top states for residential foreclosures, but now even the Brits are getting in on the miserable action. This morning, the Guardian reports that Brits are facing "micro-markets of decline." That apt phrase may well describe the real estate situation in southeast lower Michigan and Detroit.

And this sounds extremely familiar:

The Royal Institution of Charter Surveyors "believes the trend will continue in 2008 as interest rates bite for homeowners whose fixed-rate deals have come to an end. It predicts repossessions will exceed 45,000 next year, a figure that would translate into 125 repossessions per day."

Britain's population is about five times that of Michigan, but 125 repossessions per day will affect tens of thousands of families and children.

Adjustable rate mortgages do not help people "afford" homes. Here, as in Britain, ARMs are at the heart of a default crisis. ARMs defer the moment of truth when a borrower must face the real limits of income and expenses, cash flow and variable interest rates.

Even a British accent cannot take away the sting of default and repossession.