The definition of inflation is Too Many Dollars Chasing Too Few Goods and Services. The Chairman of the Fed does not seem to understand that fact and he has just printed billions of new dollars with absolutely no new goods or services to accompany them. Inflation is inevitable. Today's Los Angeles Times explains how this process is beginning. Read on.
latimes.com
Rumblings of inflation grow louder
Commodity prices are rising — driven by higher consumption, bad weather and investor demand — and Americans are starting to feel it in their pocketbooks.
By P.J. Huffstutter and Tom Petruno, Los Angeles Times
November 10, 2010
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Be it a bushel of wheat from Kansas, a ton of rice from India or a barrel of crude from Saudi Arabia, prices for all manner of commodities are on the rise across the globe, a trend that is starting to pinch American consumers.
On Tuesday prices of many raw materials continued to surge, with gold, cotton and sugar reaching record highs. A closely watched index of 19 major commodities closed at a two-year high, despite a late-day sell-off in gold and oil.
The effects are rippling from financial trading floors to local stores, forcing consumers to shell out more for everyday basics — a cup of coffee, a box of cereal, a gallon of gasoline.
Those increases are being driven in part by short supplies of some crops and raw materials caused by poor weather in major producing regions and robust demand from emerging markets such as China and India.
Investors and speculators also are pushing up prices as they jump into rising commodity markets. They are being drawn to these so-called hard assets to hedge against inflation and the risk of further devaluation of the dollar and other paper currencies.
But that fear of inflation could ultimately be the fuel that feeds it, analysts warned.
"Billions of dollars are moving into oil, and then it becomes a self-fulfilling prophecy," said Tom Kloza, chief oil analyst for the Oil Price Information Service.
Crude oil prices are up 9% this year to nearly $87 a barrel. Fuel costs directly affect what consumers pay for food.
Take breakfast. This year alone, raw coffee prices on commodity exchanges are up 60%. Corn and soybeans, the basic feed for hogs and cattle, have risen 39% and 26%, respectively. Wheat, a dietary staple for many cultures, is up 33%, and sugar is up 23%.
Even napkins and tablecloths to set the table have grown more expensive to make: Cotton prices have leapt 100% this year, to $1.51 a pound, a high not seen in this country since the Civil War.
This latest run-up in commodities, which began in late August, so far has boosted prices only modestly for consumers. But next year the impact could be far more serious, particularly if harvests for major crops are poor, Wall Street and agricultural analysts warned.
Retail food prices have already started to rise after remaining relatively flat for the first half of the year, said Ephraim Leibtag, an economist with U.S. Department of Agriculture's Economic Research Service.
The agency forecasts that overall inflation for food prices, projected at 0.5% to 1.5% this year, in 2011 will range from 2% to 3%. "But some segments — such as dairy and meat — will be higher than that," Leibtag said.
Now a wide swath of American businesses face a tough task: figuring out how much, if at all, they can raise their prices without scaring off customers in a still-struggling economy.
General Mills Inc., citing higher costs for grain and other ingredients, is raising prices on some of its breakfast cereals this month and some baking products in January. Kraft Foods Inc. said during a call with analysts last week that it had raised or planned to raise prices on about 40% of its products sold in the U.S., including coffee and cheese.
Starbucks said it would charge more for some its larger drinks because the cost of its coffee beans is skyrocketing.
Rival Peet's Coffee & Tea Inc. already has jacked up prices, blaming the run-up in raw coffee. In September, the Emeryville, Calif.-based chain tacked on 10 cents to the price of most of its drinks and 8% to the price of bagged beans sold in its stores.
Citing cotton costs, apparel makers Jones Group Inc., Hanesbrands Inc. and VF Corp. have said they expect to boost clothing prices by as much as 10% early next year.
Still, raw material costs often represent only a small portion of the final retail price of a product, compared with labor, marketing and transportation. And it's unclear whether most manufacturers and retailers — particularly big-box stores such as Wal-Mart Stores Inc. — will risk alienating shoppers by raising their prices significantly.
But some corporate leaders are clear about their intentions.
"The reality is, costs are going up for everyone," Irene Rosenfeld, chief executive of Kraft Foods, told analysts during a quarterly earnings call last week.
Beverly Shafer agrees. The co-owner of Schooner or Later, a popular diner in Long Beach, has watched her supply bills grow by hundreds of dollars a month. Her coffee vendor raised prices 30 cents a pound in October — then announced another 30-cent hike this month.
Her bacon prices have jumped to $77 per box from $47.
"Do you have any idea how much bacon and coffee we go through?" Shafer said. "We've tried not to raise our prices, but we have no choice. We're going to have to do it. Prices have to go up across the board on our menu. We can't keep up."
But even modest price increases are more than some strapped shoppers can bear.
Cheap has become the shopping mantra for Mike Sherry, 34, a Reseda-based radio production director, who stopped by a Target store in Los Angeles on Tuesday.
"I'm really just aware of what place has the best deal," Sherry said.
Higher commodity prices, while a bane for consumers, are a potential bonanza for investors and traders. They are being drawn to raw materials as a way to diversify their portfolio holdings, alongside stocks, bonds, real estate and other assets.
The appeal stems in large part from the U.S. government's decision to allow the dollar to weaken in the global economy. The greenback's value has tumbled against other major currencies by more than 12% since June. The Obama administration has favored a slumping dollar as a way to bolster economic growth by making American exports cheaper for foreign buyers.
That has had two effects. First, because most commodities are priced in dollars worldwide, a falling greenback means raw materials become cheaper for countries with stronger currencies. That stokes demand.
Second, cheapening the dollar drives some global investors and speculators to seek out assets that will hold their value or rise. Commodities can fill that bill.
"A common view now is that it's better to own a hard asset than a piece of paper [currency]," said Adam Sieminski, a veteran commodities analyst at Deutsche Bank Securities.
Yet many analysts don't believe that serious inflation can take hold in the U.S. as long as unemployment remains high and businesses and consumers remain cautious about spending.
Even as commodity prices have jumped this year, the "core" U.S. consumer price index, meaning prices excluding food and energy, was up just 0.8% in September from a year earlier, the smallest increase since 1961.
In fact, the Federal Reserve, fearing that the weak U.S. economy could tip into deflation — a broad-based decline in prices and wages — last week agreed to pump an additional $600 billion into the financial system by June, hoping to underpin growth and lift inflation modestly.
The central bank's assumption is that if consumers believe inflation might be higher in a year they should be more willing to spend money now rather than wait in the hope of getting lower prices.
But the Fed's move has stirred anger among many of America's trading partners, including China, Germany and Brazil, who see it as an attempt to further weaken the dollar at the expense of their exports. That has set the scene for potentially contentious discussions between President Obama and other world leaders gathering for the G-20 summit in South Korea this week.
What's more, although official U.S. inflation rates remain subdued, rising inflation already is vexing many fast-growing Asian economies, spurring their central banks to begin tightening credit even as the U.S. seeks to loosen it further.
Mihir Worah, who manages a $20-billion commodities investment fund at Pimco in Newport Beach, said the Fed now faced a delicate balancing act in actively trying to boost U.S. inflation, with raw material prices already rising sharply,
"The Fed wants people to believe that more inflation is coming," he said. "But if enough people believe it, it could have the wrong impact" on commodities.
p.j.huffstutter@latimes.com
tom.petruno@latimes.com
Times staff writers Nate Jackson and Ronald L. White contributed to this report.
Copyright © 2010, Los Angeles Times
Wednesday, November 10, 2010
Tuesday, November 9, 2010
Small Business Story
When I was going to graduate school at NYU, we lived in Astoria, just one block off of 30th Avenue. Our landlords had come from Genoa, Italy when they were in their twenties. In the thirties, they opened a restaurant around the corner. They went broke because they couldn't not feed friends who were broke. This story in today's New York Times tells the story of today's hard times for small businesses. Notice the role that government intervention plays in some of the stories.
A Small-Business Barometer in Astoria
By FERNANDA SANTOS
Marino & Sons Fish Market opened on 30th Avenue in Astoria, Queens, in 1932, fulfilling the dreams of a scrawny teenager from Sicily who had been peddling fish from woven baskets along the streets of Manhattan.
The fishmonger, Baldasarre Marino, and then a son, a grandson and a great-grandson — all named Charles — kept the market alive through the Great Depression, the 1970s fiscal crisis and the blackout of 2006. But the great recession proved to be too much, and the market closed in July, suffering the fate of some neighboring small businesses, like a pub run by a man from Ireland and a carpet store owned by a man from Greece.
“There’s no insurance against a bad economy,” said Charlie Marino, a great-grandson of the fish market’s founder.
But along with endings there have been beginnings. Last month, an eyewear shop opened in a spot where rolls of carpets were once stacked. Three doors from the fish market, a Louisiana-style restaurant is set to open soon, while across the street, a shuttered lounge has resurfaced as a Latin restaurant.
And so this small commercial stretch — eight blocks of 30th Avenue, bracketed by 31st Street and Steinway Street — is a microcosm of how small businesses are faring as the economy flails.
A street that has long been an incubator of financial hopes and aspirations for waves of immigrants has fallen victim to high rents and disappearing customers. But this strip also has a resilient streak, a history of newcomers arriving with an entrepreneurial spirit and a willingness to work hard and take a chance.
Wall Street may be the economic lifeblood of New York City, but it is small businesses, places with 100 workers or less, that are the city’s backbone, accounting for 98 percent of its roughly 233,000 companies, according to the state’s Department of Labor.
Even at the height of the recession in 2008, small businesses provided nearly half of all private-sector jobs available in the city, more than they did in 1990, a study to be released by the Center for an Urban Future, a research institute, found. “Small businesses are the only ones that have been taking chances,” said Jonathan Bowles, the center’s director.
Still, the struggles of neighborhood businesses are underscored by persistently high retail vacancy rates. Nowhere is the problem more pronounced than in Queens, which logged a vacancy rate of 13 percent in the third quarter of this year, the highest in the city, according to Marcus & Millichap, a national brokerage firm. Manhattan had the lowest vacancy rate, about 7 percent. In the third quarter two years ago, the vacancy rates were 4 percent for Queens and 2.8 percent for Manhattan.
A survey this summer by Representative Anthony D. Weiner painted a dismal picture in several shopping districts in Queens, finding more than one in 5 stores closed along a busy stretch of Jamaica Avenue that runs through Richmond Hill and Woodhaven, and one in 10 stores closed in Glendale. On Woodhaven Boulevard in Rego Park, almost 20 percent of storefronts were closed.
“This is more than an economic indicator,” Mr. Weiner, a Democrat who represents parts of Queens and Brooklyn, said in an interview. “It’s a sort of psychic barometer of a community.”
In Astoria, about 30 mom-and-pop stores along 30th Avenue have gone out of business in the past two years, in what has been of the most unforgiving financial times for a strip that has experienced booms and busts along with successive waves of immigrants.
Greeks and Italians arrived at the turn of the last century and opened butcher shops and salumerias that sold prosciutto, pancetta and racks of lamb.
Croatians followed, and then Czechs and other Eastern Europeans, who favored travel agencies and hair salons. More recently, Brazilians opened restaurants, and Arabs started jewelry stores. Now, in a reckless gamble or an act of faith, a fresh crop of business owners is trying to make it on the avenue.
For Annie Zhu, 31, and Michelle Ho, 35, friends and partners in the optical shop, Vision Essential, failure would probably mean having to go back to working for someone else.
For Al Lau, 39, and his wife, Michele Addeo, 38, the owners of the Louisiana-style restaurant, Sugarfreak, it would probably mean losing everything they have.
Mr. Lau and Ms. Addeo signed the lease on the 1,000-square-foot space a year ago and have been paying rent ever since, though their landlord agreed to charge them $3,000 a month, half of what they will be paying once the restaurant opens. The discount is welcome, but it does little to lessen their problems.
The couple applied for small-business loans, but banks turned them down, saying that restaurants were too risky, Mr. Lau said.
They have run through their savings — Mr. Lau is a lawyer and Ms. Addeo is a physical therapist — and hit the limit on their credit cards to finance their restaurant, which is not yet finished. They spent $150,000 on kitchen equipment and $25,000 on lawyers after a neighborhood group opposed their application for a liquor license. (The restaurant has been granted a provisional license.)
The store’s wood floor was rotten, and it took two months to get the necessary permit to replace it, then an additional five months and $20,000 to replace a pipe connecting a water main to the restaurant.
They are now waiting for a final inspection while applying the finishing touches. On a recent morning, their contractor arrived with a big chandelier that will hang over the bar.
“At this point, we’re too far into it to turn back,” Mr. Lau said. “But we’re going to give it a shot.”
“And it’s going to work out,” Ms. Addeo added. “Hopefully.”
To open their eyewear shop on 30th Avenue, Ms. Zhu and Ms. Ho relied on a loan and a little luck. Because of the poor economy, Prada and Versace, which would ordinarily not do business with a small neighborhood store in Queens, were eager to sell to them. And though the two women quit their jobs to devote themselves full time to their business, their husbands did not.
“Everybody needs eyeglasses,” said Ms. Ho, who was born in China, grew up in Hong Kong and moved to New York in 1997.
Ms. Zhu, whose parents came from China, added, “The big question for us is, are people going to buy a $100 frame or a $300 frame?”
Their landlord, George Georgiou, 70, who ran the carpet store for 30 years, had many good years. He bought the building that housed his store — ground-floor space with apartments above — and a similar one nearby. He also bought a home in the neighborhood, and he put both his children through law school.
But business eventually slowed so much that it made no sense to stay open.
“Economy hard,” Mr. Georgiou said. “More hard and more competition to do business today.”
Mr. Marino, of the fish market, also owns the building where his store was, but for now he is trying to figure out what to do with all the equipment he still has there, while keeping going the wholesale fish business he has had on the side.
The other day, Mr. Georgiou stopped by the grand opening for his tenants’ store and offered Ms. Zhu and Ms. Ho simple advice.
“When I come to America, the way to make more money is the business way,” Mr. Georgiou told them. “Own your business still good; better than work for somebody else.”
A Small-Business Barometer in Astoria
By FERNANDA SANTOS
Marino & Sons Fish Market opened on 30th Avenue in Astoria, Queens, in 1932, fulfilling the dreams of a scrawny teenager from Sicily who had been peddling fish from woven baskets along the streets of Manhattan.
The fishmonger, Baldasarre Marino, and then a son, a grandson and a great-grandson — all named Charles — kept the market alive through the Great Depression, the 1970s fiscal crisis and the blackout of 2006. But the great recession proved to be too much, and the market closed in July, suffering the fate of some neighboring small businesses, like a pub run by a man from Ireland and a carpet store owned by a man from Greece.
“There’s no insurance against a bad economy,” said Charlie Marino, a great-grandson of the fish market’s founder.
But along with endings there have been beginnings. Last month, an eyewear shop opened in a spot where rolls of carpets were once stacked. Three doors from the fish market, a Louisiana-style restaurant is set to open soon, while across the street, a shuttered lounge has resurfaced as a Latin restaurant.
And so this small commercial stretch — eight blocks of 30th Avenue, bracketed by 31st Street and Steinway Street — is a microcosm of how small businesses are faring as the economy flails.
A street that has long been an incubator of financial hopes and aspirations for waves of immigrants has fallen victim to high rents and disappearing customers. But this strip also has a resilient streak, a history of newcomers arriving with an entrepreneurial spirit and a willingness to work hard and take a chance.
Wall Street may be the economic lifeblood of New York City, but it is small businesses, places with 100 workers or less, that are the city’s backbone, accounting for 98 percent of its roughly 233,000 companies, according to the state’s Department of Labor.
Even at the height of the recession in 2008, small businesses provided nearly half of all private-sector jobs available in the city, more than they did in 1990, a study to be released by the Center for an Urban Future, a research institute, found. “Small businesses are the only ones that have been taking chances,” said Jonathan Bowles, the center’s director.
Still, the struggles of neighborhood businesses are underscored by persistently high retail vacancy rates. Nowhere is the problem more pronounced than in Queens, which logged a vacancy rate of 13 percent in the third quarter of this year, the highest in the city, according to Marcus & Millichap, a national brokerage firm. Manhattan had the lowest vacancy rate, about 7 percent. In the third quarter two years ago, the vacancy rates were 4 percent for Queens and 2.8 percent for Manhattan.
A survey this summer by Representative Anthony D. Weiner painted a dismal picture in several shopping districts in Queens, finding more than one in 5 stores closed along a busy stretch of Jamaica Avenue that runs through Richmond Hill and Woodhaven, and one in 10 stores closed in Glendale. On Woodhaven Boulevard in Rego Park, almost 20 percent of storefronts were closed.
“This is more than an economic indicator,” Mr. Weiner, a Democrat who represents parts of Queens and Brooklyn, said in an interview. “It’s a sort of psychic barometer of a community.”
In Astoria, about 30 mom-and-pop stores along 30th Avenue have gone out of business in the past two years, in what has been of the most unforgiving financial times for a strip that has experienced booms and busts along with successive waves of immigrants.
Greeks and Italians arrived at the turn of the last century and opened butcher shops and salumerias that sold prosciutto, pancetta and racks of lamb.
Croatians followed, and then Czechs and other Eastern Europeans, who favored travel agencies and hair salons. More recently, Brazilians opened restaurants, and Arabs started jewelry stores. Now, in a reckless gamble or an act of faith, a fresh crop of business owners is trying to make it on the avenue.
For Annie Zhu, 31, and Michelle Ho, 35, friends and partners in the optical shop, Vision Essential, failure would probably mean having to go back to working for someone else.
For Al Lau, 39, and his wife, Michele Addeo, 38, the owners of the Louisiana-style restaurant, Sugarfreak, it would probably mean losing everything they have.
Mr. Lau and Ms. Addeo signed the lease on the 1,000-square-foot space a year ago and have been paying rent ever since, though their landlord agreed to charge them $3,000 a month, half of what they will be paying once the restaurant opens. The discount is welcome, but it does little to lessen their problems.
The couple applied for small-business loans, but banks turned them down, saying that restaurants were too risky, Mr. Lau said.
They have run through their savings — Mr. Lau is a lawyer and Ms. Addeo is a physical therapist — and hit the limit on their credit cards to finance their restaurant, which is not yet finished. They spent $150,000 on kitchen equipment and $25,000 on lawyers after a neighborhood group opposed their application for a liquor license. (The restaurant has been granted a provisional license.)
The store’s wood floor was rotten, and it took two months to get the necessary permit to replace it, then an additional five months and $20,000 to replace a pipe connecting a water main to the restaurant.
They are now waiting for a final inspection while applying the finishing touches. On a recent morning, their contractor arrived with a big chandelier that will hang over the bar.
“At this point, we’re too far into it to turn back,” Mr. Lau said. “But we’re going to give it a shot.”
“And it’s going to work out,” Ms. Addeo added. “Hopefully.”
To open their eyewear shop on 30th Avenue, Ms. Zhu and Ms. Ho relied on a loan and a little luck. Because of the poor economy, Prada and Versace, which would ordinarily not do business with a small neighborhood store in Queens, were eager to sell to them. And though the two women quit their jobs to devote themselves full time to their business, their husbands did not.
“Everybody needs eyeglasses,” said Ms. Ho, who was born in China, grew up in Hong Kong and moved to New York in 1997.
Ms. Zhu, whose parents came from China, added, “The big question for us is, are people going to buy a $100 frame or a $300 frame?”
Their landlord, George Georgiou, 70, who ran the carpet store for 30 years, had many good years. He bought the building that housed his store — ground-floor space with apartments above — and a similar one nearby. He also bought a home in the neighborhood, and he put both his children through law school.
But business eventually slowed so much that it made no sense to stay open.
“Economy hard,” Mr. Georgiou said. “More hard and more competition to do business today.”
Mr. Marino, of the fish market, also owns the building where his store was, but for now he is trying to figure out what to do with all the equipment he still has there, while keeping going the wholesale fish business he has had on the side.
The other day, Mr. Georgiou stopped by the grand opening for his tenants’ store and offered Ms. Zhu and Ms. Ho simple advice.
“When I come to America, the way to make more money is the business way,” Mr. Georgiou told them. “Own your business still good; better than work for somebody else.”
Saturday, November 6, 2010
Aw Cheese.....................
This story is so ugly I can only classify it as "Life's a Bitch and then You Die"!!
Before you read this story, go back and read the Road Trip Report. It has direct relevance.
While Warning About Fat, U.S. Pushes Sales of Cheese
By MICHAEL MOSS
Domino’s Pizza was hurting early last year. Domestic sales had fallen, and a survey of big pizza chain customers left the company tied for the worst tasting pies.
Then help arrived from an organization called Dairy Management. It teamed up with Domino’s to develop a new line of pizzas with 40 percent more cheese, and proceeded to devise and pay for a $12 million marketing campaign.
Consumers devoured the cheesier pizza, and sales soared by double digits. “This partnership is clearly working,” Brandon Solano, the Domino’s vice president for brand innovation, said in a statement to The New York Times.
But as healthy as this pizza has been for Domino’s, one slice contains as much as two-thirds of a day’s maximum recommended amount of saturated fat, which has been linked to heart disease and is high in calories.
And Dairy Management, which has made cheese its cause, is not a private business consultant. It is a marketing creation of the United States Department of Agriculture — the same agency at the center of a federal anti-obesity drive that discourages over-consumption of some of the very foods Dairy Management is vigorously promoting.
Urged on by government warnings about saturated fat, Americans have been moving toward low-fat milk for decades, leaving a surplus of whole milk and milk fat. Yet the government, through Dairy Management, is engaged in an effort to find ways to get dairy back into Americans’ diets, primarily through cheese.
Americans now eat an average of 33 pounds of cheese a year, nearly triple the 1970 rate. Cheese has become the largest source of saturated fat; an ounce of many cheeses contains as much saturated fat as a glass of whole milk.
When Michelle Obama implored restaurateurs in September to help fight obesity, she cited the proliferation of cheeseburgers and macaroni and cheese. “I want to challenge every restaurant to offer healthy menu options,” she told the National Restaurant Association’s annual meeting.
But in a series of confidential agreements approved by agriculture secretaries in both the Bush and Obama administrations, Dairy Management has worked with restaurants to expand their menus with cheese-laden products.
Consider the Taco Bell steak quesadilla, with cheddar, pepper jack, mozzarella and a creamy sauce. “The item used an average of eight times more cheese than other items on their menu,” the Agriculture Department said in a report, extolling Dairy Management’s work — without mentioning that the quesadilla has more than three-quarters of the daily recommended level of saturated fat and sodium.
Dairy Management, whose annual budget approaches $140 million, is largely financed by a government-mandated fee on the dairy industry. But it also receives several million dollars a year from the Agriculture Department, which appoints some of its board members, approves its marketing campaigns and major contracts and periodically reports to Congress on its work.
The organization’s activities, revealed through interviews and records, provide a stark example of inherent conflicts in the Agriculture Department’s historical roles as both marketer of agriculture products and America’s nutrition police.
In one instance, Dairy Management spent millions of dollars on research to support a national advertising campaign promoting the notion that people could lose weight by consuming more dairy products, records and interviews show. The campaign went on for four years, ending in 2007, even though other researchers — one paid by Dairy Management itself — found no such weight-loss benefits.
When the campaign was challenged as false, government lawyers defended it, saying the Agriculture Department “reviewed, approved and continually oversaw” the effort.
Dr. Walter C. Willett, chairman of the nutrition department at the Harvard School of Public Health and a former member of the federal government’s nutrition advisory committee, said: “The U.S.D.A. should not be involved in these programs that are promoting foods that we are consuming too much of already. A small amount of good-flavored cheese can be compatible with a healthy diet, but consumption in the U.S. is enormous and way beyond what is optimally healthy.”
The Agriculture Department declined to make top officials available for interviews for this article, and Dairy Management would not comment. In answering written questions, the department said that dairy promotion was intended to bolster farmers and rural economies, and that its oversight left Dairy Management’s board with “significant independence” in deciding how best to support those interests.
The department acknowledged that cheese is high in saturated fat, but said that lower milk consumption had made cheese an important source of calcium.
“When eaten in moderation and with attention to portion size, cheese can fit into a low-fat, healthy diet,” the department said.
In its reports to Congress, however, the Agriculture Department tallies Dairy Management’s successes in millions of pounds of cheese served.
In 2007, the department highlighted Pizza Hut’s Cheesy Bites pizza, Wendy’s “dual Double Melt sandwich concept,” and Burger King’s Cheesy Angus Bacon cheeseburger and TenderCrisp chicken sandwich. “Both featured two slices of American cheese, a slice of pepper jack and a cheesy sauce,” the department said.
These efforts, the department reported, helped generate a “cheese sales growth of nearly 30 million pounds.”
Relentless Marketing
Every day, the nation’s cows produce an average of about 60 million gallons of raw milk, yet less than a third goes toward making milk that people drink. And the majority of that milk has fat removed to make the low-fat or nonfat milk that Americans prefer. A vast amount of leftover whole milk and extracted milk fat results.
For years, the federal government bought the industry’s excess cheese and butter, an outgrowth of a Depression-era commitment to use price supports and other tools to maintain the dairy industry as a vital national resource. This stockpile, packed away in cool caves in Missouri, grew to a value of more than $4 billion by 1983, when Washington switched gears.
The government started buying only what it needed for food assistance programs. It also began paying farmers to slaughter some dairy cows. But at the time, the industry was moving toward larger, more sophisticated operations that increased productivity through artificial insemination, hormones and lighting that kept cows more active.
In 1995, the government created Dairy Management Inc., a nonprofit corporation that has defined its mission as increasing dairy consumption by “offering the products consumers want, where and when they want them.”
Dairy Management, through the “Got Milk?” campaign, has been successful at slowing the decline in milk consumption, particularly focusing on schoolchildren. It has also relentlessly marketed cheese and pushed back against the Agriculture Department’s suggestion that people eat only low-fat or fat-free varieties.
In a July letter to the department’s nutrition committee, Dairy Management wrote that efforts to make fat-free cheese have largely foundered because fat is what makes cheese appealing. “Consumer acceptance of low-fat and fat-free cheeses has been limited,” it said.
Agriculture Department data show that cheese is a major reason the average American diet contains too much saturated fat.
Research has found that the cardiovascular benefits in cutting saturated fat may depend on what replaces it. Refined starches and sugar might be just as bad or even worse, while switching to unsaturated fats has been shown to reduce the risk of heart disease.
The department’s nutrition committee issued a new standard this summer calling for saturated fat not to exceed 7 percent of total calories, about 15.6 grams in a 2,000-calorie-a-day diet. Yet the average intake has remained about 11 percent to 12 percent of total calories for at least 15 years.
The department issued nutritional hints in a brochure titled “Steps To A Healthier You!” It instructs pizza lovers: “Ask for whole wheat crust and half the cheese” — even as Dairy Management has worked with pizza chains like Domino’s to increase cheese.
Dairy Management runs the largest of 18 Agriculture Department programs that market beef, pork, potatoes and other commodities. Their budgets are largely paid by levies imposed on farmers, but Dairy Management, which reported expenditures of $136 million last year, also received $5.3 million that year from the Agriculture Department to promote dairy sales overseas.
By comparison, the department’s Center for Nutrition Policy and Promotion, which promotes healthy diets, has a total budget of $6.5 million.
Although by law the secretary of agriculture approves Dairy Management’s contracts and advertising campaigns, the organization has become a full-blown company with 162 employees skilled in product development and marketing. It also includes the National Dairy Council, a 95-year-old group that acts as its research and communications arm.
Dairy Management’s longtime chief executive, Thomas P. Gallagher, received $633,475 in compensation in 2008, with first-class travel privileges, according to federal tax filings. Annual compensation for two other officials top $300,000 each.
Mr. Gallagher, who declined to be interviewed for this article, was described by board members, employees and food industry officials as an astute executive and effective champion of the sprawling dairy industry.
“He’s a big thinker,” said David Brandon, former chief executive of Domino’s. “A very creative guy who thinks big and is willing to make bets in helping to drive the business on behalf of his dairy farmers.”
Disputed Research
“Great news for dieters,” Dairy Management said in an advertisement in People magazine in 2005. “Clinical studies show that people on a reduced-calorie diet who consume three servings of milk, cheese or yogurt each day can lose significantly more weight and more body fat than those who just cut calories.”
With milk consumption in decline, Dairy Management had hit on a fresh marketing strategy with its weight-loss campaign.
When the campaign began in 2003, a Dairy Management official said it was inspired by newly relaxed federal rules on health claims and the ensuing “rapid growth of ‘better for you’ products.”
It was based on research by Michael B. Zemel, a University of Tennessee nutritionist and author of “The Calcium Key: The Revolutionary Diet Discovery That Will Help You Lose Weight Faster.” Precisely how dairy facilitates weight loss is unclear, Dr. Zemel said in interviews and e-mails, but in part it involves counteracting a hormone that fosters fat deposits when the body is low on calcium.
Dairy Management licensed Dr. Zemel’s research, promoted his book and enlisted a team of scientific advisers who “identified further research to develop more aggressive claims in the future,” according to a campaign strategy presentation.
One such study was conducted by Jean Harvey-Berino, chairwoman of the Department of Nutrition and Food Sciences at the University of Vermont. “I think they felt they had a lot riding on it,” she said of the weight loss claim, “and felt it was a cash cow if it worked out.”
“I’m a big promoter of dairy,” she added, noting that her research was also paid for by Dairy Management.
But by 2004, her study had found no evidence of weight loss. She said Dairy Management took the news poorly, threatening to audit her work. She said she was astonished when the organization pressed on with its ad campaign.
“I thought they were crazy, and that eventually somebody would catch up with them,” she said.
Her study was published in 2005, and at scientific meetings she heard from other researchers who also failed to confirm Dr. Zemel’s work, including Dr. Jack A. Yanovski, an obesity unit chief at the National Institutes of Health.
But in late 2006, Dairy Management was still citing the weight-loss claim in urging the Agriculture Department not to cut the amount of cheese in federal food assistance programs. “The available data provide strong support for a beneficial effect of increased dairy foods on body weight and body composition,” two organization officials wrote, making no mention of Dr. Harvey-Berino’s findings.
Having dismissed the weight-loss claim in 2005, the federal nutrition advisory committee this summer again found the underlying science “not convincing.”
The campaign lasted until 2007, when the Federal Trade Commission acted on a two-year-old petition by the Physicians Committee for Responsible Medicine, an advocacy group that challenged the campaign’s claims. “If you want to look at why people are fat today, it’s pretty hard to identify a contributor more significant than this meteoric rise in cheese consumption,” Dr. Neal D. Barnard, president of the physicians’ group, said in an interview.
The trade commission notified the group that Agriculture Department and dairy officials had decided to halt the campaign pending additional research. Dr. Zemel said he remained hopeful that his findings would eventually be upheld.
Meanwhile, Dairy Management, which allotted $12.4 million for nutrition research in 2008, has moved on to finance studies on promising opportunities, including the promotion of chocolate milk as a sports recovery drink and the use of cheese to entice children into eating healthy foods like string beans.
An All-Out Campaign
On Oct. 13, Domino’s announced the latest in its Legends line of cheesier pizza, which Dairy Management is promoting with the $12 million marketing effort.
Called the Wisconsin, the new pie has six cheeses on top and two more in the crust. “This is one way that we can support dairy farms across the country: by selling a pizza featuring an abundance of their products,” a Domino’s spokesman said in a news release. “We think that’s a good thing.”
A laboratory test of the Wisconsin that was commissioned by The Times found that one-quarter of a medium thin-crust pie had 12 grams of saturated fat, more than three-quarters of the recommended daily maximum. It also has 430 calories, double the calories in pizza formulations that the chain bills as its “lighter options.”
According to contract records released through the Freedom of Information Act, Dairy Management’s role in helping to develop Domino’s pizzas included generating and testing new pizza concepts.
When Dairy Management began working with companies like Domino’s, it first had to convince them that cheese would make their products more desirable, records and interviews show. It provided banners and special lighting for the drive-up window menus at fast food restaurants, recalled Debra Olson Linday, who led Dairy Management’s early efforts in promoting cheese to restaurant chains before leaving in 1997.
By 1999, food retailers and manufacturers were coming to Dairy Management for help.
“Let’s sell more pizza and more cheese!” said two officials with Pizza Hut, which began putting cheese inside its crust after holding development meetings with Dairy Management, according to a memorandum released by the Agriculture Department.
Derek Correia, a former Pizza Hut product innovations chief, said Dairy Management also helped find suppliers for the extra cheese. “We were using four cheeses, if not six, and with a company like Pizza Hut, that is a lot of supply,” he said in an interview.
And unlike with its advertising campaigns, Dairy Management and the Agriculture Department could point to specific results with these projects. The “Summer of Cheese” promotion it developed with Pizza Hut in 2002 generated the use of 102 million additional pounds of cheese, the department reported to Congress.
“More cheese on pizza equals more cheese sales,” Mr. Gallagher, the Dairy Management chief executive, wrote in a guest column in a trade publication last year. “In fact, if every pizza included one more ounce of cheese, we would sell an additional 250 million pounds of cheese annually.”
Working with some of the largest food companies, Dairy Management has also pushed to expand the use of cheese in processed foods and home cooking. The Agriculture Department has reported a 5 percent to 16 percent increase in sales of cheese snacks in stores where Dairy Management has helped grocers reinvent their dairy aisles. Now on display is an array of sliced, grated and cubed products, along with handy recipes for home cooking that use more cheese.
The strategy is focusing on families whose cheese “habit” outpaces their concern about the health risks, Dairy Management documents show. One study gave them a name: “Cheese snacking fanatics.”
Before you read this story, go back and read the Road Trip Report. It has direct relevance.
While Warning About Fat, U.S. Pushes Sales of Cheese
By MICHAEL MOSS
Domino’s Pizza was hurting early last year. Domestic sales had fallen, and a survey of big pizza chain customers left the company tied for the worst tasting pies.
Then help arrived from an organization called Dairy Management. It teamed up with Domino’s to develop a new line of pizzas with 40 percent more cheese, and proceeded to devise and pay for a $12 million marketing campaign.
Consumers devoured the cheesier pizza, and sales soared by double digits. “This partnership is clearly working,” Brandon Solano, the Domino’s vice president for brand innovation, said in a statement to The New York Times.
But as healthy as this pizza has been for Domino’s, one slice contains as much as two-thirds of a day’s maximum recommended amount of saturated fat, which has been linked to heart disease and is high in calories.
And Dairy Management, which has made cheese its cause, is not a private business consultant. It is a marketing creation of the United States Department of Agriculture — the same agency at the center of a federal anti-obesity drive that discourages over-consumption of some of the very foods Dairy Management is vigorously promoting.
Urged on by government warnings about saturated fat, Americans have been moving toward low-fat milk for decades, leaving a surplus of whole milk and milk fat. Yet the government, through Dairy Management, is engaged in an effort to find ways to get dairy back into Americans’ diets, primarily through cheese.
Americans now eat an average of 33 pounds of cheese a year, nearly triple the 1970 rate. Cheese has become the largest source of saturated fat; an ounce of many cheeses contains as much saturated fat as a glass of whole milk.
When Michelle Obama implored restaurateurs in September to help fight obesity, she cited the proliferation of cheeseburgers and macaroni and cheese. “I want to challenge every restaurant to offer healthy menu options,” she told the National Restaurant Association’s annual meeting.
But in a series of confidential agreements approved by agriculture secretaries in both the Bush and Obama administrations, Dairy Management has worked with restaurants to expand their menus with cheese-laden products.
Consider the Taco Bell steak quesadilla, with cheddar, pepper jack, mozzarella and a creamy sauce. “The item used an average of eight times more cheese than other items on their menu,” the Agriculture Department said in a report, extolling Dairy Management’s work — without mentioning that the quesadilla has more than three-quarters of the daily recommended level of saturated fat and sodium.
Dairy Management, whose annual budget approaches $140 million, is largely financed by a government-mandated fee on the dairy industry. But it also receives several million dollars a year from the Agriculture Department, which appoints some of its board members, approves its marketing campaigns and major contracts and periodically reports to Congress on its work.
The organization’s activities, revealed through interviews and records, provide a stark example of inherent conflicts in the Agriculture Department’s historical roles as both marketer of agriculture products and America’s nutrition police.
In one instance, Dairy Management spent millions of dollars on research to support a national advertising campaign promoting the notion that people could lose weight by consuming more dairy products, records and interviews show. The campaign went on for four years, ending in 2007, even though other researchers — one paid by Dairy Management itself — found no such weight-loss benefits.
When the campaign was challenged as false, government lawyers defended it, saying the Agriculture Department “reviewed, approved and continually oversaw” the effort.
Dr. Walter C. Willett, chairman of the nutrition department at the Harvard School of Public Health and a former member of the federal government’s nutrition advisory committee, said: “The U.S.D.A. should not be involved in these programs that are promoting foods that we are consuming too much of already. A small amount of good-flavored cheese can be compatible with a healthy diet, but consumption in the U.S. is enormous and way beyond what is optimally healthy.”
The Agriculture Department declined to make top officials available for interviews for this article, and Dairy Management would not comment. In answering written questions, the department said that dairy promotion was intended to bolster farmers and rural economies, and that its oversight left Dairy Management’s board with “significant independence” in deciding how best to support those interests.
The department acknowledged that cheese is high in saturated fat, but said that lower milk consumption had made cheese an important source of calcium.
“When eaten in moderation and with attention to portion size, cheese can fit into a low-fat, healthy diet,” the department said.
In its reports to Congress, however, the Agriculture Department tallies Dairy Management’s successes in millions of pounds of cheese served.
In 2007, the department highlighted Pizza Hut’s Cheesy Bites pizza, Wendy’s “dual Double Melt sandwich concept,” and Burger King’s Cheesy Angus Bacon cheeseburger and TenderCrisp chicken sandwich. “Both featured two slices of American cheese, a slice of pepper jack and a cheesy sauce,” the department said.
These efforts, the department reported, helped generate a “cheese sales growth of nearly 30 million pounds.”
Relentless Marketing
Every day, the nation’s cows produce an average of about 60 million gallons of raw milk, yet less than a third goes toward making milk that people drink. And the majority of that milk has fat removed to make the low-fat or nonfat milk that Americans prefer. A vast amount of leftover whole milk and extracted milk fat results.
For years, the federal government bought the industry’s excess cheese and butter, an outgrowth of a Depression-era commitment to use price supports and other tools to maintain the dairy industry as a vital national resource. This stockpile, packed away in cool caves in Missouri, grew to a value of more than $4 billion by 1983, when Washington switched gears.
The government started buying only what it needed for food assistance programs. It also began paying farmers to slaughter some dairy cows. But at the time, the industry was moving toward larger, more sophisticated operations that increased productivity through artificial insemination, hormones and lighting that kept cows more active.
In 1995, the government created Dairy Management Inc., a nonprofit corporation that has defined its mission as increasing dairy consumption by “offering the products consumers want, where and when they want them.”
Dairy Management, through the “Got Milk?” campaign, has been successful at slowing the decline in milk consumption, particularly focusing on schoolchildren. It has also relentlessly marketed cheese and pushed back against the Agriculture Department’s suggestion that people eat only low-fat or fat-free varieties.
In a July letter to the department’s nutrition committee, Dairy Management wrote that efforts to make fat-free cheese have largely foundered because fat is what makes cheese appealing. “Consumer acceptance of low-fat and fat-free cheeses has been limited,” it said.
Agriculture Department data show that cheese is a major reason the average American diet contains too much saturated fat.
Research has found that the cardiovascular benefits in cutting saturated fat may depend on what replaces it. Refined starches and sugar might be just as bad or even worse, while switching to unsaturated fats has been shown to reduce the risk of heart disease.
The department’s nutrition committee issued a new standard this summer calling for saturated fat not to exceed 7 percent of total calories, about 15.6 grams in a 2,000-calorie-a-day diet. Yet the average intake has remained about 11 percent to 12 percent of total calories for at least 15 years.
The department issued nutritional hints in a brochure titled “Steps To A Healthier You!” It instructs pizza lovers: “Ask for whole wheat crust and half the cheese” — even as Dairy Management has worked with pizza chains like Domino’s to increase cheese.
Dairy Management runs the largest of 18 Agriculture Department programs that market beef, pork, potatoes and other commodities. Their budgets are largely paid by levies imposed on farmers, but Dairy Management, which reported expenditures of $136 million last year, also received $5.3 million that year from the Agriculture Department to promote dairy sales overseas.
By comparison, the department’s Center for Nutrition Policy and Promotion, which promotes healthy diets, has a total budget of $6.5 million.
Although by law the secretary of agriculture approves Dairy Management’s contracts and advertising campaigns, the organization has become a full-blown company with 162 employees skilled in product development and marketing. It also includes the National Dairy Council, a 95-year-old group that acts as its research and communications arm.
Dairy Management’s longtime chief executive, Thomas P. Gallagher, received $633,475 in compensation in 2008, with first-class travel privileges, according to federal tax filings. Annual compensation for two other officials top $300,000 each.
Mr. Gallagher, who declined to be interviewed for this article, was described by board members, employees and food industry officials as an astute executive and effective champion of the sprawling dairy industry.
“He’s a big thinker,” said David Brandon, former chief executive of Domino’s. “A very creative guy who thinks big and is willing to make bets in helping to drive the business on behalf of his dairy farmers.”
Disputed Research
“Great news for dieters,” Dairy Management said in an advertisement in People magazine in 2005. “Clinical studies show that people on a reduced-calorie diet who consume three servings of milk, cheese or yogurt each day can lose significantly more weight and more body fat than those who just cut calories.”
With milk consumption in decline, Dairy Management had hit on a fresh marketing strategy with its weight-loss campaign.
When the campaign began in 2003, a Dairy Management official said it was inspired by newly relaxed federal rules on health claims and the ensuing “rapid growth of ‘better for you’ products.”
It was based on research by Michael B. Zemel, a University of Tennessee nutritionist and author of “The Calcium Key: The Revolutionary Diet Discovery That Will Help You Lose Weight Faster.” Precisely how dairy facilitates weight loss is unclear, Dr. Zemel said in interviews and e-mails, but in part it involves counteracting a hormone that fosters fat deposits when the body is low on calcium.
Dairy Management licensed Dr. Zemel’s research, promoted his book and enlisted a team of scientific advisers who “identified further research to develop more aggressive claims in the future,” according to a campaign strategy presentation.
One such study was conducted by Jean Harvey-Berino, chairwoman of the Department of Nutrition and Food Sciences at the University of Vermont. “I think they felt they had a lot riding on it,” she said of the weight loss claim, “and felt it was a cash cow if it worked out.”
“I’m a big promoter of dairy,” she added, noting that her research was also paid for by Dairy Management.
But by 2004, her study had found no evidence of weight loss. She said Dairy Management took the news poorly, threatening to audit her work. She said she was astonished when the organization pressed on with its ad campaign.
“I thought they were crazy, and that eventually somebody would catch up with them,” she said.
Her study was published in 2005, and at scientific meetings she heard from other researchers who also failed to confirm Dr. Zemel’s work, including Dr. Jack A. Yanovski, an obesity unit chief at the National Institutes of Health.
But in late 2006, Dairy Management was still citing the weight-loss claim in urging the Agriculture Department not to cut the amount of cheese in federal food assistance programs. “The available data provide strong support for a beneficial effect of increased dairy foods on body weight and body composition,” two organization officials wrote, making no mention of Dr. Harvey-Berino’s findings.
Having dismissed the weight-loss claim in 2005, the federal nutrition advisory committee this summer again found the underlying science “not convincing.”
The campaign lasted until 2007, when the Federal Trade Commission acted on a two-year-old petition by the Physicians Committee for Responsible Medicine, an advocacy group that challenged the campaign’s claims. “If you want to look at why people are fat today, it’s pretty hard to identify a contributor more significant than this meteoric rise in cheese consumption,” Dr. Neal D. Barnard, president of the physicians’ group, said in an interview.
The trade commission notified the group that Agriculture Department and dairy officials had decided to halt the campaign pending additional research. Dr. Zemel said he remained hopeful that his findings would eventually be upheld.
Meanwhile, Dairy Management, which allotted $12.4 million for nutrition research in 2008, has moved on to finance studies on promising opportunities, including the promotion of chocolate milk as a sports recovery drink and the use of cheese to entice children into eating healthy foods like string beans.
An All-Out Campaign
On Oct. 13, Domino’s announced the latest in its Legends line of cheesier pizza, which Dairy Management is promoting with the $12 million marketing effort.
Called the Wisconsin, the new pie has six cheeses on top and two more in the crust. “This is one way that we can support dairy farms across the country: by selling a pizza featuring an abundance of their products,” a Domino’s spokesman said in a news release. “We think that’s a good thing.”
A laboratory test of the Wisconsin that was commissioned by The Times found that one-quarter of a medium thin-crust pie had 12 grams of saturated fat, more than three-quarters of the recommended daily maximum. It also has 430 calories, double the calories in pizza formulations that the chain bills as its “lighter options.”
According to contract records released through the Freedom of Information Act, Dairy Management’s role in helping to develop Domino’s pizzas included generating and testing new pizza concepts.
When Dairy Management began working with companies like Domino’s, it first had to convince them that cheese would make their products more desirable, records and interviews show. It provided banners and special lighting for the drive-up window menus at fast food restaurants, recalled Debra Olson Linday, who led Dairy Management’s early efforts in promoting cheese to restaurant chains before leaving in 1997.
By 1999, food retailers and manufacturers were coming to Dairy Management for help.
“Let’s sell more pizza and more cheese!” said two officials with Pizza Hut, which began putting cheese inside its crust after holding development meetings with Dairy Management, according to a memorandum released by the Agriculture Department.
Derek Correia, a former Pizza Hut product innovations chief, said Dairy Management also helped find suppliers for the extra cheese. “We were using four cheeses, if not six, and with a company like Pizza Hut, that is a lot of supply,” he said in an interview.
And unlike with its advertising campaigns, Dairy Management and the Agriculture Department could point to specific results with these projects. The “Summer of Cheese” promotion it developed with Pizza Hut in 2002 generated the use of 102 million additional pounds of cheese, the department reported to Congress.
“More cheese on pizza equals more cheese sales,” Mr. Gallagher, the Dairy Management chief executive, wrote in a guest column in a trade publication last year. “In fact, if every pizza included one more ounce of cheese, we would sell an additional 250 million pounds of cheese annually.”
Working with some of the largest food companies, Dairy Management has also pushed to expand the use of cheese in processed foods and home cooking. The Agriculture Department has reported a 5 percent to 16 percent increase in sales of cheese snacks in stores where Dairy Management has helped grocers reinvent their dairy aisles. Now on display is an array of sliced, grated and cubed products, along with handy recipes for home cooking that use more cheese.
The strategy is focusing on families whose cheese “habit” outpaces their concern about the health risks, Dairy Management documents show. One study gave them a name: “Cheese snacking fanatics.”
So Damn Much Money
That is the title of Robert G. Kaiser's book on the development and growth of lobbying in Washington. You owe it to yourself and to your children to read this book. It truly is important and I will explain that in a moment. You can get a clue from the book's subtitle, "The Triumph of Lobbying and the Corrosion of American Government". Get the most recent version in paperback.
Kaiser has structured the book around the story of Gerald S.J. Cassidy who pretty much "invented" modern lobbying, but the real story is how money now runs everything in the U.S. government. This is how Leon Panetta (now head of the CIA and former Congressman and top aide to Clinton) describes the situation in the book.
"Legalized bribery has become part of the culture of how this place operates," Paneta said on a visit to Washington. Today's members of the House and Senate "rarely legislate; they basically follow the money. They're spending more and more time dialing for dollars....the only place they have to turn is to lobbyists. Members have a whole list of names in their pockets at all times, and they just keep dialing. It has become an addiction that they can't break."
In case you think he is being hysterical, remember that over $4 BILLION !!!! was spent in the just past election. That is TWICE the amount spent on the previous most expensive election.
The book showed me just how I naive I have been. I thought that if we could just keep lobbyists off Capitol Hill, we could control the influence of special interests. Wrong, and wrong again! Two of Obama's first appointments were "former" lobbyists in spite of his promise to clean up the place.
It is an incredibly complicated problem. Here is why.
In the 13th Century, King Edward of England decreed that every Englishman had the right to petition the government. You can hardly argue with that.
But what if you are not very good at writing a petition, is it O.K. to hire someone else to write it?
But what if you are not very good at face to face meetings to present your petition,is it O.K. to hire someone else to present your petition?
Then how about hiring people to organize all the reasons why your petition should be granted.
And then throwing an elaborate and expensive party to explain to the right people why they should support your petition. Still O. K.?
Now if your Congress Persons are going to be able to support your petition, they have to get re-elected. Is it O.K. for you to give them money to get re-elected?
But you can't give anybody really big money (see $4 BILLION above), so how about hiring some people to go out and find people with truly deep pockets who can make contributions to your folks. Still O.K.?
Now theoretically, your Congress Person should be able to walk the fine ethical line here, but in reality, that almost never happens. What does happen is that your Congress Person is constantly raising dollars to keep the job. Here is how a week in Washington goes now days; Thursday, travel home. Friday, Saturday, Sunday, and Monday, raise money. Tuesday, travel back to Washington. Wednesday, attend to government affairs. Are you beginning to understand just how dysfunctional Washington has become?
Nancy Pelosi thinks this schedule is so onerous that she bought a Boeing 737 (with your money) to make the journey home every weekend easier.
So the fundamental problem is that everyone in Congress is so reliant on lobbyists for raising funds that prohibiting lobbyists from Capitol Hill will never work.
Here is how Kaiser describes the situation.
"Not addressing problems has become easy in a political environment distorted by money. Money allows politicians to run for office without mentioning important matters that affect ordinary Americans' lives. A pollster and a political consultant making slick thirty second commercials can fully compensate for a candidate who has no real philosophy of governance nor a coherent view of the world. The result is unreal politics--candidates winning or losing office on the basis of their positions on social issues essentially unrelated to governance, for example. In these three decades when money became more important in Washington, Congress has lost much of its effectiveness as a governing institution. Running for re-election became more important than running the country, or keeping an eye on the exercise of executive power--the roles the founders envisioned for the House and Senate. The quality of governance in the United States had declined palpably in these years."
Does this paragraph explain to you why nothing gets done in Congress these days?
Read the book for all the fascinating details and meet some very interesting people.
So what is the answer? Best idea I have found is Larry Lessig's idea (www.fixCongressfirst.org) that nobody,organization or company should be able to contribute more than $250 per candidate per election. See an earlier rant about a bill in Congress that says exactly that. However, we will have to overturn the Supreme Court to get that to happen.
Kaiser has structured the book around the story of Gerald S.J. Cassidy who pretty much "invented" modern lobbying, but the real story is how money now runs everything in the U.S. government. This is how Leon Panetta (now head of the CIA and former Congressman and top aide to Clinton) describes the situation in the book.
"Legalized bribery has become part of the culture of how this place operates," Paneta said on a visit to Washington. Today's members of the House and Senate "rarely legislate; they basically follow the money. They're spending more and more time dialing for dollars....the only place they have to turn is to lobbyists. Members have a whole list of names in their pockets at all times, and they just keep dialing. It has become an addiction that they can't break."
In case you think he is being hysterical, remember that over $4 BILLION !!!! was spent in the just past election. That is TWICE the amount spent on the previous most expensive election.
The book showed me just how I naive I have been. I thought that if we could just keep lobbyists off Capitol Hill, we could control the influence of special interests. Wrong, and wrong again! Two of Obama's first appointments were "former" lobbyists in spite of his promise to clean up the place.
It is an incredibly complicated problem. Here is why.
In the 13th Century, King Edward of England decreed that every Englishman had the right to petition the government. You can hardly argue with that.
But what if you are not very good at writing a petition, is it O.K. to hire someone else to write it?
But what if you are not very good at face to face meetings to present your petition,is it O.K. to hire someone else to present your petition?
Then how about hiring people to organize all the reasons why your petition should be granted.
And then throwing an elaborate and expensive party to explain to the right people why they should support your petition. Still O. K.?
Now if your Congress Persons are going to be able to support your petition, they have to get re-elected. Is it O.K. for you to give them money to get re-elected?
But you can't give anybody really big money (see $4 BILLION above), so how about hiring some people to go out and find people with truly deep pockets who can make contributions to your folks. Still O.K.?
Now theoretically, your Congress Person should be able to walk the fine ethical line here, but in reality, that almost never happens. What does happen is that your Congress Person is constantly raising dollars to keep the job. Here is how a week in Washington goes now days; Thursday, travel home. Friday, Saturday, Sunday, and Monday, raise money. Tuesday, travel back to Washington. Wednesday, attend to government affairs. Are you beginning to understand just how dysfunctional Washington has become?
Nancy Pelosi thinks this schedule is so onerous that she bought a Boeing 737 (with your money) to make the journey home every weekend easier.
So the fundamental problem is that everyone in Congress is so reliant on lobbyists for raising funds that prohibiting lobbyists from Capitol Hill will never work.
Here is how Kaiser describes the situation.
"Not addressing problems has become easy in a political environment distorted by money. Money allows politicians to run for office without mentioning important matters that affect ordinary Americans' lives. A pollster and a political consultant making slick thirty second commercials can fully compensate for a candidate who has no real philosophy of governance nor a coherent view of the world. The result is unreal politics--candidates winning or losing office on the basis of their positions on social issues essentially unrelated to governance, for example. In these three decades when money became more important in Washington, Congress has lost much of its effectiveness as a governing institution. Running for re-election became more important than running the country, or keeping an eye on the exercise of executive power--the roles the founders envisioned for the House and Senate. The quality of governance in the United States had declined palpably in these years."
Does this paragraph explain to you why nothing gets done in Congress these days?
Read the book for all the fascinating details and meet some very interesting people.
So what is the answer? Best idea I have found is Larry Lessig's idea (www.fixCongressfirst.org) that nobody,organization or company should be able to contribute more than $250 per candidate per election. See an earlier rant about a bill in Congress that says exactly that. However, we will have to overturn the Supreme Court to get that to happen.
Wednesday, November 3, 2010
Income Inequality
The average financial industry employee earned slightly more than $100,000 in the first THREE months of 2010, a 20% IMPROVEMENT over the first quarter of 2009. The average American worker earned $10,668 in the same period. (The New York Times)
You only have one question to ask yourself. "Which of those people made your life better."
If you answer, The Wall Street Banker, then you are in the 1% of all Americans who receive 40% of all the income. Well Done!!
You only have one question to ask yourself. "Which of those people made your life better."
If you answer, The Wall Street Banker, then you are in the 1% of all Americans who receive 40% of all the income. Well Done!!
Tuesday, November 2, 2010
Get Ready For Serious Inflation!
America's largest companies are all sitting a pile of cash bigger than at any time in recent history. America's smallest companies are dying right and left from a lack of customers and cash flow. Additional borrowing and interest payments are about the last thing they need.
So what is the Government's response to these facts and a 10% unemployment rate? They are going to PRINT trillions of dollars of new money to make it easier for companies to get credit, which, of course, is the last thing they need.
The only people who can use this flood of new money are the banks. They will use it to speculate in the markets where they will occur big losses eventually and here we go again!!
Always remember the definition of INFLATION! Too many dollars chasing too few products and services. The Fed is producing a huge amount of new dollars and the economy is producing no more goods and services than in the past. You do the math.
Then read today's New York Times.
Fed Is Poised to Aid Economy, but Impact Is Cloudy
By SEWELL CHAN
WASHINGTON — The Federal Reserve is all but certain to move to spur the nation’s sputtering recovery this Wednesday, but most economists say it is unlikely to have a big impact on employment and growth.
Overruling objections from a handful of inflation-fearing dissidents, the Fed’s policy-setting committee, which begins a two-day meeting on Tuesday, is expected to resume quantitative easing, a strategy of buying Treasury securities to put downward pressure on long-term interest rates. The hope is that new action by the Fed will make a deflationary spiral of falling prices less likely, and make it somewhat easier for consumers and businesses to borrow and spend.
In theory, the Fed could print trillions of dollars to achieve its aim, but it is far more likely to start with a smaller amount — perhaps a few hundred billion — and gradually buy more bonds as conditions warrant.
That open-ended, conditional approach would be a departure from the Fed’s first, $1.7 trillion round of debt purchases, which lasted about 15 months and ended in March.
The Fed’s chairman, Ben S. Bernanke, seems to be under no illusion about the potency of the new purchases, having declared in August that “central bankers alone cannot solve the world’s economic problems.”
With inflation well below the Fed’s unofficial target of 2 percent, unemployment stuck at nearly 10 percent, and gross domestic product growing at a lethargic rate, Mr. Bernanke has evidently concluded that doing nothing is not an option.
Mr. Bernanke has long argued that a central bank, having lowered short-term rates to zero, as the Fed did in December 2008, still has tools to prevent an economy from slipping into deflation; he is now following that advice.
But economists seem to be in broad agreement that no matter the magnitude of the Fed’s actions this week, the economy will remain challenged for some time.
“There is a substantial chance that the U.S. economy is headed into a lost decade, similar to what Japan has experienced in the past 15 years, possibly with zero inflation instead of actual deflation,” said Robert J. Gordon, of Northwestern University, who serves on the committee that determines the start and end dates of recessions.
“But the consequences for the U.S. population will be much more severe than in Japan,” he added, “because of our higher unemployment rate, our lack of a social safety net, our system that ties medical insurance to employment instead of making it a right of citizenship, our greater inequality and our higher level of poverty.”
Guillermo A. Calvo, of the School of International and Public Affairs at Columbia University, gave a similar assessment.
“The central problem in the U.S. is the breakdown of the credit channel, especially credit for small firms and for working capital,” he said. “Buying long-term Treasury bonds amounts to directing credit toward a sector that has no need for it.”
The Fed’s actions, Mr. Calvo said, will mostly be felt abroad. Quantitative easing is likely to push down the value of the dollar and send even more money flowing into the faster-growing economies of Asia and Latin America, where interest rates are higher and inflation is a greater worry than in the sluggish economies of North America and Western Europe.
Mr. Calvo said the result could be heightened tensions over currency and trade and pressure on emerging-market countries to curb the flow of capital into their economies.
The Fed has clearly taken steps to address both sources of anxiety, domestic and foreign, and to fully prepare the markets for its next move.
On Aug. 10, the Fed took a baby step toward additional monetary expansion, deciding to use proceeds from its portfolio of mortgage-backed securities to buy two- to 10-year Treasury securities. In an Aug. 27 speech in Jackson Hole, Wyo., Mr. Bernanke emphasized the need to analyze both the costs and the benefits of action, but made it clear he was prepared to move if needed.
At the Fed’s most recent policy meeting, on Sept. 21, the committee said it was “prepared to provide additional accommodation if needed,” and in a speech in Boston on Oct. 15, Mr. Bernanke said “there would appear — all else being equal — to be a case for further action.”
The actions have already had an effect. Since Aug. 10, long-term interest rates have fallen, stock prices have risen and expectations of inflation have crept upward.
At a closed-door gathering of central bankers from the Group of 20 economic powers in Gyeongju, South Korea, on Oct. 22 and 23, Mr. Bernanke tried to reassure his peers, some of whom expressed alarm about the effect of Fed action on the dollar.
In response, Mr. Bernanke cited the imperative of supporting domestic growth and the role American consumer demand plays in sustaining the worldwide recovery, according to people who attended the meeting.
What the chairman has not managed — or necessarily tried — to do, however, is to quell the dissenting voices within the Fed who say additional action is a grave mistake.
The most prominent dissenter, Thomas M. Hoenig, president of the Federal Reserve Bank of Kansas City, has argued that new quantitative easing could lead to imbalances and volatility, undermine the Fed’s independence and unmoor inflation expectations. In his most pointed language to date, he recently called the plan a “dangerous gamble” and a “bargain with the devil.”
Other regional Fed presidents — Charles I. Plosser of Philadelphia, Richard W. Fisher of Dallas and Jeffrey M. Lacker of Richmond — also oppose additional bond purchases. But there is substantial support for more monetary stimulus from William C. Dudley of New York, Eric S. Rosengren of Boston, Charles L. Evans of Chicago and, recently, Dennis P. Lockhart of Atlanta.
Speculation about “hawks” (whose priority is fighting inflation) and “doves” (who put relatively greater emphasis on reducing unemployment) is a well-established game among Fed watchers.
But it is Mr. Bernanke’s opinion that ultimately matters. He has studiously avoided wading into fiscal controversies, but it seems clear that the gridlock over taxes and spending, and the virulence of the rhetoric going into the Tuesday elections, has deprived the central bank of the support fiscal policy can play in bolstering the recovery.
“Fiscal measures would accomplish something; they directly support spending and therefore G.D.P.,” said James K. Galbraith, an economist at the Lyndon B. Johnson School of Public Affairs at the University of Texas, Austin. “Quantitative easing will accomplish nothing beyond flooding the banks with cash which they will use, if at all, for speculating rather than lending.”
But Scott E. Pardee, an economist at Middlebury College, said Mr. Bernanke was correct to do all he could. “As long as unemployment is so high, and the housing market is not standing on its own two feet yet, the Fed has no other choice,” he said.
So what is the Government's response to these facts and a 10% unemployment rate? They are going to PRINT trillions of dollars of new money to make it easier for companies to get credit, which, of course, is the last thing they need.
The only people who can use this flood of new money are the banks. They will use it to speculate in the markets where they will occur big losses eventually and here we go again!!
Always remember the definition of INFLATION! Too many dollars chasing too few products and services. The Fed is producing a huge amount of new dollars and the economy is producing no more goods and services than in the past. You do the math.
Then read today's New York Times.
Fed Is Poised to Aid Economy, but Impact Is Cloudy
By SEWELL CHAN
WASHINGTON — The Federal Reserve is all but certain to move to spur the nation’s sputtering recovery this Wednesday, but most economists say it is unlikely to have a big impact on employment and growth.
Overruling objections from a handful of inflation-fearing dissidents, the Fed’s policy-setting committee, which begins a two-day meeting on Tuesday, is expected to resume quantitative easing, a strategy of buying Treasury securities to put downward pressure on long-term interest rates. The hope is that new action by the Fed will make a deflationary spiral of falling prices less likely, and make it somewhat easier for consumers and businesses to borrow and spend.
In theory, the Fed could print trillions of dollars to achieve its aim, but it is far more likely to start with a smaller amount — perhaps a few hundred billion — and gradually buy more bonds as conditions warrant.
That open-ended, conditional approach would be a departure from the Fed’s first, $1.7 trillion round of debt purchases, which lasted about 15 months and ended in March.
The Fed’s chairman, Ben S. Bernanke, seems to be under no illusion about the potency of the new purchases, having declared in August that “central bankers alone cannot solve the world’s economic problems.”
With inflation well below the Fed’s unofficial target of 2 percent, unemployment stuck at nearly 10 percent, and gross domestic product growing at a lethargic rate, Mr. Bernanke has evidently concluded that doing nothing is not an option.
Mr. Bernanke has long argued that a central bank, having lowered short-term rates to zero, as the Fed did in December 2008, still has tools to prevent an economy from slipping into deflation; he is now following that advice.
But economists seem to be in broad agreement that no matter the magnitude of the Fed’s actions this week, the economy will remain challenged for some time.
“There is a substantial chance that the U.S. economy is headed into a lost decade, similar to what Japan has experienced in the past 15 years, possibly with zero inflation instead of actual deflation,” said Robert J. Gordon, of Northwestern University, who serves on the committee that determines the start and end dates of recessions.
“But the consequences for the U.S. population will be much more severe than in Japan,” he added, “because of our higher unemployment rate, our lack of a social safety net, our system that ties medical insurance to employment instead of making it a right of citizenship, our greater inequality and our higher level of poverty.”
Guillermo A. Calvo, of the School of International and Public Affairs at Columbia University, gave a similar assessment.
“The central problem in the U.S. is the breakdown of the credit channel, especially credit for small firms and for working capital,” he said. “Buying long-term Treasury bonds amounts to directing credit toward a sector that has no need for it.”
The Fed’s actions, Mr. Calvo said, will mostly be felt abroad. Quantitative easing is likely to push down the value of the dollar and send even more money flowing into the faster-growing economies of Asia and Latin America, where interest rates are higher and inflation is a greater worry than in the sluggish economies of North America and Western Europe.
Mr. Calvo said the result could be heightened tensions over currency and trade and pressure on emerging-market countries to curb the flow of capital into their economies.
The Fed has clearly taken steps to address both sources of anxiety, domestic and foreign, and to fully prepare the markets for its next move.
On Aug. 10, the Fed took a baby step toward additional monetary expansion, deciding to use proceeds from its portfolio of mortgage-backed securities to buy two- to 10-year Treasury securities. In an Aug. 27 speech in Jackson Hole, Wyo., Mr. Bernanke emphasized the need to analyze both the costs and the benefits of action, but made it clear he was prepared to move if needed.
At the Fed’s most recent policy meeting, on Sept. 21, the committee said it was “prepared to provide additional accommodation if needed,” and in a speech in Boston on Oct. 15, Mr. Bernanke said “there would appear — all else being equal — to be a case for further action.”
The actions have already had an effect. Since Aug. 10, long-term interest rates have fallen, stock prices have risen and expectations of inflation have crept upward.
At a closed-door gathering of central bankers from the Group of 20 economic powers in Gyeongju, South Korea, on Oct. 22 and 23, Mr. Bernanke tried to reassure his peers, some of whom expressed alarm about the effect of Fed action on the dollar.
In response, Mr. Bernanke cited the imperative of supporting domestic growth and the role American consumer demand plays in sustaining the worldwide recovery, according to people who attended the meeting.
What the chairman has not managed — or necessarily tried — to do, however, is to quell the dissenting voices within the Fed who say additional action is a grave mistake.
The most prominent dissenter, Thomas M. Hoenig, president of the Federal Reserve Bank of Kansas City, has argued that new quantitative easing could lead to imbalances and volatility, undermine the Fed’s independence and unmoor inflation expectations. In his most pointed language to date, he recently called the plan a “dangerous gamble” and a “bargain with the devil.”
Other regional Fed presidents — Charles I. Plosser of Philadelphia, Richard W. Fisher of Dallas and Jeffrey M. Lacker of Richmond — also oppose additional bond purchases. But there is substantial support for more monetary stimulus from William C. Dudley of New York, Eric S. Rosengren of Boston, Charles L. Evans of Chicago and, recently, Dennis P. Lockhart of Atlanta.
Speculation about “hawks” (whose priority is fighting inflation) and “doves” (who put relatively greater emphasis on reducing unemployment) is a well-established game among Fed watchers.
But it is Mr. Bernanke’s opinion that ultimately matters. He has studiously avoided wading into fiscal controversies, but it seems clear that the gridlock over taxes and spending, and the virulence of the rhetoric going into the Tuesday elections, has deprived the central bank of the support fiscal policy can play in bolstering the recovery.
“Fiscal measures would accomplish something; they directly support spending and therefore G.D.P.,” said James K. Galbraith, an economist at the Lyndon B. Johnson School of Public Affairs at the University of Texas, Austin. “Quantitative easing will accomplish nothing beyond flooding the banks with cash which they will use, if at all, for speculating rather than lending.”
But Scott E. Pardee, an economist at Middlebury College, said Mr. Bernanke was correct to do all he could. “As long as unemployment is so high, and the housing market is not standing on its own two feet yet, the Fed has no other choice,” he said.
Monday, November 1, 2010
Road Trip Report
We have just completed a 6,000 mile, five week, trip through seventeen states and this is a report on that journey.
First of all, this is a beautiful country!! And the fall colors were magnificent. If you send me a email address I will send you forty photographs of those remarkable colors. You can do this by leaving a comment at the end of this report.
Second, as David Zetland predicted, we met a lot of really nice people.
Third, as you watch the political TV commercials on the local TV in each state, you realize how bitter and angry people are everywhere.
Next, this trip has shown us three huge failures of the Obama administration. Reading or talking about them is one thing, seeing them first hand is quite another.
One: Obama's economic stimulus is mis-directed and wasted. There are approximately 50,000 miles in the Interstate System. We experienced about 10% of them first hand. My rough estimate is that about 15% of the Interstate System is in first class condition. Another 10% is currently being repaired. But a full 75% of the Interstate System is in simply awful condition. Try the road from Nebraska to Denver for a teeth rattling experience. In addition, the Association of Highway Engineers says there are over 10,000 bridges needing replacement or retrofitting. (Remember the bridge in Minneapolis??)
Now here is the thing. We will have to repair these roads and bridges sooner or later. And we will have to pay for it when we do. No way around it. The Interstate System moves an enormous amount of our commerce.
Spending government funds to repair these roads and bridges is a win, win, win, win decision.
Win One: It would immediately give millions of unemployed construction workers a job. (And there are millions more secondary and tertiary jobs that would be created.) This would immediately remove all those people from unemployment benefit payments.
Win Two: All of those payroll dollars would flow immediately into the economy and solve the huge problem facing our economy, i.e., a lack of consumer spending which keeps small businesses alive and hiring new employees. (One example; how many restaurants in your neighborhood have gone out of in the past year? We saw lots of them on this trip.)
Win Three: We repair our crown jewel. No other country has a system that even comes close to ours and we would be paying for it at the right time.
Win Four: We improve the distribution system for the whole country.
The Obama administration should have taken the TARP funds and made them available to individual state highway departments and to the 25,000+ mayors of U.S. cities and towns for individual projects. All of these people know exactly what needs doing in their areas. But the Obama administration wants to control everything from Washington. A big mistake!!
The Obama Administration's failure to take this no-brainer action is the first huge failure you encounter as you travel the country's highways and byways.
Two: The utter and complete failure of Obama care. Right now, 16%-18% of the entire U.S. Gross National Product is being spent on health care, and it is growing at the rate of approximately 10%-15 every year. It is on track to bankrupt the entire country in the lifetime of your children. (The amount we spend is twice the % of the GNP of any other country!!)
There is absolutely NOTHING in the Obama care bill to even slow down that growth, let alone reverse the trend. So how does that relate to a long road trip? Here is how. We saw a huge number of seriously over weight people. Fifty pounds, 100 pounds, 200 pounds, 300 pounds and more over weight! You have to see it first hand to understand it. People who can't fit into restaurant booths, people waddling along splay-footed leaning against walls to be able to walk. I know. These are not your friends. Not the people in your neighborhood, but they are real people nevertheless. O.K. here are the real numbers. 30% of U.S. adults are overweight and another 30% are clinically obese.
And here is why you should care about obesity. It leads to death, heart disease and strokes, blindness, high blood pressure, kidney disease, nervous system disease, and amputation. And here is why that is important to you. The CDC estimates that diabetes cost (the number one problem with obesity.) $174 BILLION in 2007!
Diabetes Type 2 is one of the most expensive of all diseases over the course of a person's lifetime.
And the thing that really touches your heart is all the young people who are seriously overweight. The CDC says 186,000 people under twenty already have Type 2 Diabetes and another 2 Million people under twenty have pre-diabetes. These kids are all going to have miserable lives and will cost YOU a huge amount of money.
Here are the CDC's total numbers.
Diagnosed with Diabetes now: 17.9 MILLION
Undiagnosed: 5.7 MILLION
Pre-diabetes: 57 MILLION
So why is this an Obama health care bill failure? Here why; There is not ONE SINGLE thing in the bill to address a hugely expensive problem that is right in the face of anyone who does not regularly travel in Air Force One. It is not a hidden disease like a stroke or heart attack. It is sitting right next to you in any, and every, cafe and eating place on the Interstate.
Yes, it is a good thing that insurance companies can no longer refuse pre-existing conditions and that young people can remain on their parents policies until they are twenty-six, but no how you look at it Obama care is huge piece crap!!
Now there are only two approved ways of dealing with Type 2 Diabetes, diet and exercise. It is not the job of the government to legislate what we should eat and how much we should exercise, but it is clearly the role of the government to encourage and enable better diet and more exercise. Here is some examples;
*Get sugar loaded drinks out of schools.
*Develop a set of nutritional menus for school cafeterias to use.
*Fund recess and PT programs in schools. These were the first programs cut as budget cut backs took hold.
*Create a fund to allow school principals to hire registered nutritionists to talk to students and faculty.
And for adults;
*Allow registered nutritionists to bill Medicare for diet counseling.
*Allow payments to Weight Watchers, Over Eaters Anonymous, et al.
*Fund programs similar to those that discourage smoking.
And smart people will think of more things it is reasonable for the government to do without forcing itself into anyone's life.
Three: The ETHANOL FRAUD. The very first bill that Obama signed was a spending bill whose only purpose was to distribute ear marks as widely as possible. Obama said that he hoped that would be that last one he signed. That is like an obese person eating a huge Dunkin Donut and washing it down with Diet Pepsi. Geezzzz..... But here is an example of Change We Did Not Get that you can see from the road.
As you drive through Minnesota, Indiana, Illinois, Iowa and Nebraska, you see vast, vast fields of corn. Fields that stretch to the horizon. All devoted to subsidized corn meant for ethanol. In 2009, you paid $7 BILLION to buy 4.9 Billion gallons of ethanol, which is $1.45 a gallon straight up and $2.21 for each gallon of gasoline it replaced. Studies show that ethanol is a net POLLUTER!! Your $7 BILLION reduced green house gases by 1/19 of 1%. Are you feeling screwed yet?
But wait! That was the bad news. Here is the worse news. The Obama administration just raised the amount of ethanol that must be blended to gasolene from 10% to 15% solely so that more of your money will go to about six huge agri-businesses that grow corn.
If you have been reading this rant over some time, you know that I am hugely supportive of the work that Hilary, et al, have done in foreign affairs, that Eric Shinsky, et al, have done with the VA, and Arne Duncan has done in Education.
But when you add these three huge failures that we observed on the road to the truly sell-out to Goldman Sachs financial no reform bill, it is difficult to avoid the conclusion that the Obama we worked so hard to elect is unable? unwilling? to attempt real change.
So this is the bad news. I will save the worst news for tomorrow (or the next day). In the five weeks on the road, I read Robert G. Kaiser's book SO DAMN MUCH MONEY. If you read no other book this year read this one. (Get the most recent paperback which has updates after the 2008 election.) The lesson that I learned from this book was that I have been incredibly naive about the roles of lobbyists in Washington. More on this awful problem soon.
First of all, this is a beautiful country!! And the fall colors were magnificent. If you send me a email address I will send you forty photographs of those remarkable colors. You can do this by leaving a comment at the end of this report.
Second, as David Zetland predicted, we met a lot of really nice people.
Third, as you watch the political TV commercials on the local TV in each state, you realize how bitter and angry people are everywhere.
Next, this trip has shown us three huge failures of the Obama administration. Reading or talking about them is one thing, seeing them first hand is quite another.
One: Obama's economic stimulus is mis-directed and wasted. There are approximately 50,000 miles in the Interstate System. We experienced about 10% of them first hand. My rough estimate is that about 15% of the Interstate System is in first class condition. Another 10% is currently being repaired. But a full 75% of the Interstate System is in simply awful condition. Try the road from Nebraska to Denver for a teeth rattling experience. In addition, the Association of Highway Engineers says there are over 10,000 bridges needing replacement or retrofitting. (Remember the bridge in Minneapolis??)
Now here is the thing. We will have to repair these roads and bridges sooner or later. And we will have to pay for it when we do. No way around it. The Interstate System moves an enormous amount of our commerce.
Spending government funds to repair these roads and bridges is a win, win, win, win decision.
Win One: It would immediately give millions of unemployed construction workers a job. (And there are millions more secondary and tertiary jobs that would be created.) This would immediately remove all those people from unemployment benefit payments.
Win Two: All of those payroll dollars would flow immediately into the economy and solve the huge problem facing our economy, i.e., a lack of consumer spending which keeps small businesses alive and hiring new employees. (One example; how many restaurants in your neighborhood have gone out of in the past year? We saw lots of them on this trip.)
Win Three: We repair our crown jewel. No other country has a system that even comes close to ours and we would be paying for it at the right time.
Win Four: We improve the distribution system for the whole country.
The Obama administration should have taken the TARP funds and made them available to individual state highway departments and to the 25,000+ mayors of U.S. cities and towns for individual projects. All of these people know exactly what needs doing in their areas. But the Obama administration wants to control everything from Washington. A big mistake!!
The Obama Administration's failure to take this no-brainer action is the first huge failure you encounter as you travel the country's highways and byways.
Two: The utter and complete failure of Obama care. Right now, 16%-18% of the entire U.S. Gross National Product is being spent on health care, and it is growing at the rate of approximately 10%-15 every year. It is on track to bankrupt the entire country in the lifetime of your children. (The amount we spend is twice the % of the GNP of any other country!!)
There is absolutely NOTHING in the Obama care bill to even slow down that growth, let alone reverse the trend. So how does that relate to a long road trip? Here is how. We saw a huge number of seriously over weight people. Fifty pounds, 100 pounds, 200 pounds, 300 pounds and more over weight! You have to see it first hand to understand it. People who can't fit into restaurant booths, people waddling along splay-footed leaning against walls to be able to walk. I know. These are not your friends. Not the people in your neighborhood, but they are real people nevertheless. O.K. here are the real numbers. 30% of U.S. adults are overweight and another 30% are clinically obese.
And here is why you should care about obesity. It leads to death, heart disease and strokes, blindness, high blood pressure, kidney disease, nervous system disease, and amputation. And here is why that is important to you. The CDC estimates that diabetes cost (the number one problem with obesity.) $174 BILLION in 2007!
Diabetes Type 2 is one of the most expensive of all diseases over the course of a person's lifetime.
And the thing that really touches your heart is all the young people who are seriously overweight. The CDC says 186,000 people under twenty already have Type 2 Diabetes and another 2 Million people under twenty have pre-diabetes. These kids are all going to have miserable lives and will cost YOU a huge amount of money.
Here are the CDC's total numbers.
Diagnosed with Diabetes now: 17.9 MILLION
Undiagnosed: 5.7 MILLION
Pre-diabetes: 57 MILLION
So why is this an Obama health care bill failure? Here why; There is not ONE SINGLE thing in the bill to address a hugely expensive problem that is right in the face of anyone who does not regularly travel in Air Force One. It is not a hidden disease like a stroke or heart attack. It is sitting right next to you in any, and every, cafe and eating place on the Interstate.
Yes, it is a good thing that insurance companies can no longer refuse pre-existing conditions and that young people can remain on their parents policies until they are twenty-six, but no how you look at it Obama care is huge piece crap!!
Now there are only two approved ways of dealing with Type 2 Diabetes, diet and exercise. It is not the job of the government to legislate what we should eat and how much we should exercise, but it is clearly the role of the government to encourage and enable better diet and more exercise. Here is some examples;
*Get sugar loaded drinks out of schools.
*Develop a set of nutritional menus for school cafeterias to use.
*Fund recess and PT programs in schools. These were the first programs cut as budget cut backs took hold.
*Create a fund to allow school principals to hire registered nutritionists to talk to students and faculty.
And for adults;
*Allow registered nutritionists to bill Medicare for diet counseling.
*Allow payments to Weight Watchers, Over Eaters Anonymous, et al.
*Fund programs similar to those that discourage smoking.
And smart people will think of more things it is reasonable for the government to do without forcing itself into anyone's life.
Three: The ETHANOL FRAUD. The very first bill that Obama signed was a spending bill whose only purpose was to distribute ear marks as widely as possible. Obama said that he hoped that would be that last one he signed. That is like an obese person eating a huge Dunkin Donut and washing it down with Diet Pepsi. Geezzzz..... But here is an example of Change We Did Not Get that you can see from the road.
As you drive through Minnesota, Indiana, Illinois, Iowa and Nebraska, you see vast, vast fields of corn. Fields that stretch to the horizon. All devoted to subsidized corn meant for ethanol. In 2009, you paid $7 BILLION to buy 4.9 Billion gallons of ethanol, which is $1.45 a gallon straight up and $2.21 for each gallon of gasoline it replaced. Studies show that ethanol is a net POLLUTER!! Your $7 BILLION reduced green house gases by 1/19 of 1%. Are you feeling screwed yet?
But wait! That was the bad news. Here is the worse news. The Obama administration just raised the amount of ethanol that must be blended to gasolene from 10% to 15% solely so that more of your money will go to about six huge agri-businesses that grow corn.
If you have been reading this rant over some time, you know that I am hugely supportive of the work that Hilary, et al, have done in foreign affairs, that Eric Shinsky, et al, have done with the VA, and Arne Duncan has done in Education.
But when you add these three huge failures that we observed on the road to the truly sell-out to Goldman Sachs financial no reform bill, it is difficult to avoid the conclusion that the Obama we worked so hard to elect is unable? unwilling? to attempt real change.
So this is the bad news. I will save the worst news for tomorrow (or the next day). In the five weeks on the road, I read Robert G. Kaiser's book SO DAMN MUCH MONEY. If you read no other book this year read this one. (Get the most recent paperback which has updates after the 2008 election.) The lesson that I learned from this book was that I have been incredibly naive about the roles of lobbyists in Washington. More on this awful problem soon.
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