Archive for June, 2011

In For The Long Haul

Well, this is interesting.  From Burlington Northern Santa Fe’s AAR reports from the last two years:

Coal, as you can see, makes up about half of car loadings, and that’s headed down.  Just from the couple of years, it looks as though there may be some seasonality in Intermodal, falling off in the last quarter.  I’ll know some more when I look at Union Pacific (back to 2002 and also mostly western) and CSX (back to 2006, but mostly the northeast and south).  Intermodal has improved through this year, but coal has been dropping for about 6 months.

Since the beginning of the year, coal has decoupled – so to speak – from the rest of loadings, which have climbed slightly or stayed level, even as coal has dropped.  We export a great deal of coal, and BNSF serves the western half of the country, Mexico, Canada, and the Gulf of Mexico.  (The railyard north of downtown Denver is a BNSF railyard, although we have a fair number of UP lines through the state, too.)  There have been reports that China’s been slowing down, and nobody really trusts – or should trust – the official numbers coming out of there.  Is it possible that fewer coal loadings as a sign of slackening Chinese demand?

I’m not quite sure what to make of the stagnating carloads combined with the improving outlook for intermodal.  We know that, over long distances, trains are more efficient than trucks.  Intermodal will continue to grow as a percentage of both rail traffic and overall freight ton-miles.  Is it possible that this is just more inefficiency being wrung out of the system?  Any other ideas?

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Not Keeping Pace

Back in October 2009, I wrote a piece examining the state of Colorado’s Unemployment Insurance Fund, and concluded that making long-term changes in eligibility in return for some short-term federal crack cocaine cash was a terrible trade.  There was a graph showing where our unemployment insurance fund was headed at the time, even before federal aid, and I use that term advisedly:

The “Claims Paid” is a rolling 12-month total, as are the contributions.  Well, here’s that graph now:

Colorado Unemployment Insurance Fund

 

As you can see, the federal “aid” didn’t arrest the decline, it didn’t even hide the decline.  At the beginning of 2010, Colorado’s bank balance hit $0.00, went past that, and had stayed there ever since.  That $127 million that was so valuable and necessary funded the system for about 5 1/2 weeks at the peak of claims, about 8 weeks now.

These changes weren’t just an extension of benefits.  Those extensions were supposed to be picked up by the feds.  No, the $127 MM was in return for structural changes designed to permanently increase eligibility.  Part of the justification for the increase was Mark Zandi’s claim that unemployment insurance payments had one of the highest multipliers of all forms of intervention.  But it’s been pointed out that Zandi never explained how he got to that number, and the models used have never been subjected to outside scrutiny.  Moody’s is no piker, but if policymakers are going to use their results, their models need to be subject to the same scrutiny that we give to global warming data.  Cough.

The business contribution line, you’ll notice, has been rising.  Well, that’s not because so many more people are employed now in Colorado than used to be.  It’s because every May, CDLE is allowed to levy additional assessments on business when the fund falls below a certain level.  Given that levels are those for a reservoir in Death Valley, the fund right now will meet any insolvency test you care to invent.

So now, when the federal government begins charging Colorado interest for the money loaned for the further benefits extensions, and when levels remain elevated at least in part because the terms for qualifying are more generous, Colorado is back asking (in the sense that the Stasi “asked” you not to make that joke, please) for even more money from businesses.

Ironically, the House sponsor of this financial wizardry was the man who now wants you to send him to Washington for more of the same – Rep. Sal Pace.  Someone from our enterprising media, someone who does this sort of thing for a living, really ought to ask him about this, dontcha think?

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Moody Blues

The credit rating agency Moody’s told the US government that it was running out of love, and issued a warning today about the need for the US to get its fiscal house in order, and to seize the pre-election moment to deal with the long-term structural deficit.

Oh? That’s not how you heard it? You probably heard that they would downgrade the US credit rating only because the government had defaulted.

That’s sort of what they said, but it helps if, unlike most of the mainstream media, you actually read the press release instead of cribbing from each other’s notes. The key paragraphs:

Moody’s had previously indicated that its stable outlook on the Aaa rating was based on the assumption that meaningful progress would be made within the next eighteen months in adopting measures to reverse the country’s upward debt trajectory. The debt limit negotiations represent a real near-term opportunity for agreement on a plan for fiscal consolidation. If this current opportunity passes, Moody’s believes that the likelihood of anything significant being accomplished before the next presidential election is reduced, in part because the two parties each hopes to capture both a congressional majority and the presidency in the 2012 election, after which the winning party could achieve its own agenda. Therefore, failure to reach an agreement as part of the current negotiations would increase the likelihood of a negative outlook in the near term, because the upward debt trajectory would still be in place. At present, this appears the most likely outcome, in Moody’s opinion.

If a debt-ceiling-related default were to occur, Moody’s would likely downgrade the rating shortly thereafter. The extent of and length of time before a downgrade would depend on how factors surrounding the default affect the government’s fundamental creditworthiness, including (a) the speed at which the default were cured, (b) an assessment of the effect of the default on long-term Treasury borrowing costs, and (c) measures put in place to prevent a recurrence. However, a rating in the Aa range would be the most likely outcome. Any loss to bondholders would likely be minimal or non-existent, as Moody’s anticipates that a default would be cured quickly.

The default would be a catalyst not because the government was late by a couple of days on an interest payment that everyone knew was coming anyway. It would be a catalyst because it had failed to prod the parties into addressing the long-term structural deficit and debt problems. In other words, it’s not the default itself, it’s the lack of seriousness that the default represents.  If it’s not solved now, it’ll be another two years before anyone looks seriously at it again.

The press would love to make this into a bipartisan problem – I don’t know if it’s me/I don’t know if it’s you/I don’t know if it’s both of us/Not knowing what to do. But of course, it’s not. It’s a White House and Democrat refusal to take the problem seriously that has caused this impasse. A Treasury Secretary who is more interested in using the deadline as a bludgeon; a White House whose fiscal credibility is shredded so badly that even its own party deserted it twice on key votes this week; and a Democrat Senate leadership who is so fresh out of ideas they haven’t even bothered to propose a budget, much less pass one. For two years.

Simpson and Bowles have an article in today’s Washington Post arguing that both sides have to sacrifice their sacred cows. That approach permanently locks in supposed “temporary” stimulus spending, and kills growth by raising taxes to pay for them.

As for a solution, we know you’re out there somewhere.  But when the party in power has decided to precipitate a crisis and then claim that they’re the only ones who know how to handle it, we’ll get there in your wildest dreams.

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Chinese Openness

If you liked the International Criminal Court, or the various incarnations of UN Human Rights Shindigs, you’ll love this one.

In this morning’s Wall Street Journal, in an article that doesn’t seem to have gotten much attention, Li Congjun, President of Xinhua, proposes an international code of media conduct, to be enforced by UNESCO (“Towards a New World Media Order“).

What disputes?  Who knows?  In the first six paragraphs, Li alludes to exactly zero disputes or complaints, gives no examples, and basically leaves the reader wonder what the hell he’s talking about.

Eventually, he complains about the media flow being from developed to developing countries, about developing countries not having their turn at the mike.

Of course, China has done for the media what it’s done for other consumer goods – turn it into a one-way outbound flow.  Li wants this to go global, where if you’re lucky, he’ll allow you occasional Congjungal visits with your freedom of the press.

He proposes Four Principles:

Fair: This requires that media organizations from all countries should have the right to participate in international communication on equal terms. Those media organizations in turn should provide comprehensive, objective, fair, balanced and accurate coverage to minimize discrimination and prejudice.

All-win: It is advisable to create conditions allowing media organizations from different countries to share the fruits of development in information and communication industries, to play an active role in international mass communication, and to reverse the unbalanced situation where the strong get stronger and the weak get weaker.

Inclusion: To maintain the world’s diversity, media must respect the unique cultures, customs, beliefs and values of different nations; strive to dispel suspicions and remove barriers between different cultures and civilizations; enhance dialogue and communication; and seek common ground while putting aside differences.

Responsibility: Media organizations should not only ensure openness and transparency to promote the building of an open society, but also keep to rational and constructive rules so as to turn mass communication into an active force for promoting social progress.

“F-A-I-R,” get it?  In the US, these sorts of things usually last about as long as it takes to print up the posters, but the Chinese government has a history taking this sort of crap seriously, as a way of getting everyone on the same page, which you would think would be easy, because it’s the only one being published.

You’ll notice what’s missing in that list: “Free.”  Nothing would be easier than to just point out that Xinhua asking for openness and transparency is like Mahmoud Abbas asking for equal access to semtex and leave it at that.  But the Chinese are playing a deeper game.

The Chinese are big on numbering lists of principles and ideas.  Over the years, these have brought us the wildly successful Five Year Plans, The Four Olds, the Three Kingdoms, The Two Meetings, and the One News Agency to Rule Them All, Xinhua.

Nominally, this is about the developed world dominating the world media, and giving a voice to the third world.  Well, silly, the developed world is where all the action is, it’s where all the decision-makers are, and it’s the dog to the developing world’s tail.  There’s no reason that’s set in stone, and the best way for the 3rd world to get the 1st worlders to read about them is to get on with developing their economies so there’s something to read about.  In the case of the US, if the Democrat plan of putting the budget and economy on cruise control Thelma & Louise-style continues much longer, we won’t get much choice in the matter.

That’s what happened to New York.  In the 1930s, every radio show you heard originated in New York.  Why?  Because that’s where everything important happened. The businesses were there, the markets were there, it was our biggest city, our biggest port, center of what passed for the US art world back then. Hollywood made movies, but New York made news.

Then, as New York declined, the radio and television and production headed west, and lo and behold, we discovered that we had great, Pulitzer-worthy newspapers in St. Louis and Detroit and Denver and Dallas and everywhere in-between.

It happened not because some government bureau decided that it was important to hear voices from LA, or that New Yorkers needed to listen to Louisiana’s Official Government Radio for three hours a day.  It happened because in a free society, places have the opportunity to develop and become newsworthy, and a free press is not only complementary to that, it’s part of the process of getting to prosperity, of getting to matter enough to be read about.

I already check the India Times a few times a week, and if there were something trustworthy coming out of China, I might read that on occasion, too.  As it is, I have to rely on the Journal and the western sources doing business there, and even then, I have to put on filters.  (It makes it doubly-difficult because I have to decode twice – once for the censors and again for the cultural nuances I have no idea even exist.)

What’s really going on here is part of a larger Chinese strategy on several fronts.  At 30,000 feet, China is trying to take on the Soviets’ old role of Champion of the Third World.  As part of that, this proposal to have the UN mediate media disputes dovetails nicely with the Islamic Conference’s goal of extending slander laws to their religion. And if the Chinese can actually harness the UN to their purposes of cutting short honest reporting, so much the better.

It’s an incremental process, and if the US tells the UN to take a hike, there will be others, Europeans, or CNN, who are used to the idea of government media, who won’t.  Then, when ABC or CBS or Fox or Michael Yon or Pajamas Media wants access someplace, they’ll have to play by the rules, or Americans will be able to get their news from sources who will, while the reprobates get put on the slow boat to China.  As Mark Steyn has pointed out, there’s no way in an integrated world that the US can remain an isolated bastion of freedom all by itself, alone.

The Chinese Commnunists are also trying to protect themselves.  Ever-paranoid, having seen what a minimally free media has done to the Middle East, they’re not going to let that happen to them, no sir. They’re determined to go on the offensive against it, rather than stay on the defensive over their own internal censorship and Great Firewall.  The Chinese probably don’t expect any immediate action, but they’re planting seeds here.  They’re making friends, putting things on the agenda for the long term, and at some point, they’ll hint that the price of the next loan rollover is some minimal action on this idea.

Remarkably, our somnolescent press corps didn’t even ask about this at today’s State Department Press briefing.  Maybe they’ll get around to it, but you can imagine (and I won’t print) what the reaction of Mike Royko of Jimmy Breslin or even Don Marquis would have been.  And without such a short, sharp reaction – soon – our thin-skinned Chicago-pol of a President just might starting turning this idea over in his head, too.

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What Goes To Washington, Stays In Washington

In this case, your tax money.  How else to explain DC’s disconnect from the rest of the housing market?

According to the Case-Shiller Index of Housing Prices, DC is the only metro area to see its housing prices increase over the last year, even as the rest of the country fell into a double-dip:

Washington’s percentage increase was larger than 10 other areas’ percentage decrease, so it wasn’t as though it was just eking out these gains.  You can see the disconnect even more clearly in this chart of housing prices over the last couple of years, comparing DC to the 20-market index and a couple of representative markets:

DC starts to dip with the rest of the country in late 2010, and then, right at the end of the year, as opposed to every other market in the country, it revives.  If all that extra cash came to late to save all those Democrat representatives and senators, at least they got a good price for their DC pads.

It’s not as though DC didn’t suffer a pretty serious decline in housing prices, but it’s not as though this comeback is a result of reversion to the mean from an exceptionally severe drop:

That chart shows the percentage drop from the local market peak to the market trough.

Other areas had made gains, but they’ve given most or all of them back.  All except for DC.  Only San Francisco is higher above its trough than DC is, but look at how much even of its recovery has evaporated:

When I was growing up, there was a notion afoot that DC was recession-proof.  Then, as the area matured, and the economy diversified, that perception began to weaken.  If you don’t hear Washingtonians saying it again, it’s only because they’re afraid it might be poor salesmanship.

After all, when people are starting to compare the national finances to those of Louis XVI, it’s probably not a good idea to let on that you’re living in Versailles.

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