October 16, 2011
October 16, 2011
Spengler gives a Mid-East exam.
Here's your final exam question in Middle Eastern studies:
A mass of Coptic Christians marches through Cairo to protest the military government's failure to protect them from Muslim radicals. They are attacked by stone-throwing, club-wielding rowdies. Armed forces security personnel intervene, and the Copts fight it out with the soldiers, with two dozen dead and scores injured on both sides. Who is to blame?
The full credit answer is: Benjamin Netanyahu, for building apartments in Jerusalem. If that's not what you wrote, don't blame me if you can't get a job at the New York Times.
Rarely in the course of human events have so few been blamed by so much for so many. There are precedents, for example, when Adolf Hitler claimed that a Jewish "stab in the back" lost World War I for Germany. The notion that the problems of three hundred million Arabs revolve around the governance of a few million Palestinians has the same order of credibility. ...
Nile Gardiner says the recently uncovered Iran DC terror bombing plot hangs a BS label on Obama's approach to the Mullahs.
The foiled plot by Iran’s Revolutionary Guards to assassinate the Saudi Ambassador to the United States is a slap in the face for the Obama administration, after its efforts to extend the hand of friendship to the brutal regime in Tehran. As Con Coughlin noted earlier, this should be a wake-up call for the White House. As it has done with Russia, the Obama presidency has attempted to “reset” relations with Iran. But with both Moscow and Tehran, Washington has failed. Both hostile powers have grown emboldened and aggressive in the face of American weakness, and Iran’s brazen attempt to kill a foreign diplomat in the capital city of the United States showcases the folly of the White House’s softly-softly approach towards the ruling mullahs.
While Washington dithers, Iran is marching closer and closer to developing a nuclear weapon, which according to some estimates is just six months away. Mahmoud Ahmadinejad continues to threaten Israel with genocide, while the Obama administration has significantly cooled relations with Jerusalem – hardly the right signal to send to a close friend and ally at a time of mounting tensions in the Middle East. ...
Friday afternoon is when the administration gives us the news they hope will be ignored. National Review editors are on the job though.
In a Friday bad-news dump that was a whopper even by its own standards, the Obama administration added to the announcement of a near-record annual deficit and an escalation of undeclared war in Uganda the news that the CLASS Act, an ill-conceived adjunct of the Affordable Care Act, is no more. The upshot is this: Obamacare just got a whole lot more expensive than advertised, and there is reason to believe that its Democratic architects have long known this would happen.
The Community Living Assistance Services and Support Act was the brainchild of the late senator Edward Kennedy of Massachusetts, and it was supposed to be a kind of Social Security that provided long-term care for the elderly. It figured heavily into the Democrats’ dubious accounting of the cost of the Affordable Care Act, and at the time of passage was expected to account for $70 billion out of a total $143 billion in “deficit reduction” claimed in the bill.
But that number was a lie twice over. ...
Andrew Malcolm lists the percentage of Americans who think the country is on the wrong track.
... However, since the sixth month of his White House lease Obama's right track number has been on the southbound track.
Not surprisingly, perhaps, 91% of Republicans believe the country is on the wrong track.
Ominously, though, fully 80% of independents, so crucial to any president's election, are now convinced the country is on the wrong track.
And a substantial majority of Democrats, those expected to be the most loyal to the Chicagoan, are also now thinking wrong track by 59%.
Time for the Real Good Talker to give some more speeches.
Karlyn Bowman and Andrew Rugg from AEI say that's not the only problem for the president.
President Obama is in deep political trouble. While that's hardly news—the president's approval rating sits at 40 percent in the latest Gallup poll—the picture is much bleaker than that figure would suggest. Comparing President Obama to other incumbent presidents at this point in the campaign on a variety of indicators shows how grim the picture is for the 44th president.
Just 11 percent of respondents say they are satisfied with the way things are going in the country in Gallup’s most recent poll. Only Jimmy Carter had numbers like this: In November 1979, 19 percent reported they were satisfied with the way things are going in the country. ...
Joel Kotkin explains the changes that have come to Silicon Valley. Sitting at the commanding heights doesn't create many jobs.
Even before Steve Jobs crashed the scene in late 1970s, California’s technology industry had already outpaced the entire world, creating the greatest collection of information companies anywhere. It was in this fertile suburban soil that Apple — and so many other innovative companies — took root.
Now this soil is showing signs of exhaustion, with Jobs’ death symbolizing the end of the state’s high-tech heroic age.
“Steve’s passing really makes you think how much the Valley has changed,” says Leslie Parks, former head of economic development for the city of San Jose, Silicon Valley’s largest city. “The Apple II was produced here and depended on what was unique here. In those days, we were the technology food chain from conception to product. Now we only dominate the top of the chain.”
Silicon Valley’s job creation numbers are dismal. In 1999 the San Jose-Sunnyvale-Santa Clara area had over 1 million jobs; by 2010 that number shrank by nearly 150,000. Although since 2007 and early 2010 the number of information jobs has increased substantially — up roughly 5000 to a total of 46,000 — the industrial sector, which still employs almost four times as many people as IT, lost around 12,000. Overall the region’s unemployment stands at 10%, well above the national average of 9.1% ...
Debra Saunders says there's no fool like a "green jobs" fool.
Before the Senate failed to pass his American Jobs Act Tuesday, President Obama made a last-ditch speech to talk up his troubled bill. But not once did Obama mention "green jobs" - his erstwhile jobs of the future.
Smart move. Obama's $787 billion 2009 stimulus package included $500 million for green-jobs training programs that were supposed to create new middle-class jobs for thousands of Americans. Last month, however, the Department of Labor's inspector general conducted an audit that found, as of June 30 with one-third of the funds spent and more than 50,000 participants, that only 10 percent of trainees were placed in jobs. And only 1,336 participants (or 2 percent) had held jobs for six months or longer.
The audit reported that grant recipients "expressed concerns that green jobs had not materialized and job placements into subsidized employment had been much less than expected." ...
At dinner a few days ago, Pickerhead expressed the thought it is impossible for our society to move forward until we can reconcile the competing narratives about the causes of the credsis. Here's another attempt as a Wall Street Journal Op-Ed addresses the Occupiers. You know, the left's version of the tea party - what Ann Coulter calls the "flea party."
There is no mystery where the Occupy Wall Street movement came from: It is an offspring of the same false narrative about the causes of the financial crisis that exculpated the government and brought us the Dodd-Frank Act. According to this story, the financial crisis and ensuing deep recession was caused by a reckless private sector driven by greed and insufficiently regulated. It is no wonder that people who hear this tale repeated endlessly in the media turn on Wall Street to express their frustration with the current conditions in the economy.
Their anger should be directed at those who developed and supported the federal government's housing policies that were responsible for the financial crisis.
Beginning in 1992, the government required Fannie Mae and Freddie Mac to direct a substantial portion of their mortgage financing to borrowers who were at or below the median income in their communities. The original legislative quota was 30%. But the Department of Housing and Urban Development was given authority to adjust it, and through the Bill Clinton and George W. Bush administrations HUD raised the quota to 50% by 2000 and 55% by 2007. ...
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Asia Times
Never have so few been blamed for so much by so many
by Spengler
Here's your final exam question in Middle Eastern studies:
A mass of Coptic Christians marches through Cairo to protest the military government's failure to protect them from Muslim radicals. They are attacked by stone-throwing, club-wielding rowdies. Armed forces security personnel intervene, and the Copts fight it out with the soldiers, with two dozen dead and scores injured on both sides. Who is to blame?
The full credit answer is: Benjamin Netanyahu, for building apartments in Jerusalem. If that's not what you wrote, don't blame me if you can't get a job at the New York Times.
Rarely in the course of human events have so few been blamed by so much for so many. There are precedents, for example, when Adolf Hitler claimed that a Jewish "stab in the back" lost World War I for Germany. The notion that the problems of three hundred million Arabs revolve around the governance of a few million Palestinians has the same order of credibility.
Israeli-Palestinian negotiations always presumed that Israel's peace treaties with Egypt and Jordan would remain intact - that Egypt would interdict terrorists infiltrating Israel from the Sinai, stop weapons from reaching Hamas in Gaza, and otherwise fill its obligations. But Egypt is dissolving. The Egyptian army crossed a red line on October 9, according to Egyptian blogger Issander al-Armani. Soldiers attacked Coptic demonstrators who were demanding protection from the army, The military not only shut down news coverage of the massacre, but used state television to call on Egyptian Muslims to "defend the army from the Copts".
On September 19, the Egyptian army showed that it could not protect Israel's embassy in Cairo; on October 9, it showed itself ready to murder members of the country's Christian minority. Egypt is dissolving because it can't feed itself, and it can't feed itself because it is going bankrupt. Former International Atomic Energy chief Mohamed ElBaradei, now a candidate for Egypt's presidency, warned last week that Egypt would run out of money within months, according to the English-language edition of Almasry Alroum:
Egypt might face bankruptcy within six months, Egyptian reform advocate and presidential hopeful Mohamed ElBaradei warned on Monday. During a meeting with labor leaders at the Center for Trade Unions and Workers Services (CTUWS) in Helwan, south of Cairo, ElBaradei attacked the "failing" policies of Egypt's ruling military council.He criticized the Supreme Council of the Armed Forces (SCAF) for what he called incompetence and lack of experience, saying that experienced government officials don't have enough power. Egypt is currently relying on its cash reserve with no gross domestic product, he said.
ElBaradei, the undeserved winner of the 2005 Nobel Peace Prize (he helped Iran cover its tracks en route to enriching uranium to near weapons grade), nonetheless is the closest thing to a responsible figure in Egyptian politics. His warning that Egypt is burning its cash reserves is accurate. On October 5, the Financial Times reported that Egypt's foreign exchange reserves had fallen from $35 billion in January to only $19.4 billion, enough to cover less than five months' worth of imports.
The central bank had reported $25 billion of reserves in August, [4] so the monthly decline appears to be around $6 billion; it is hard to tell precisely because the Egyptian central bank publishes contradictory data about its reserve position. The earlier $25 billion figure might have counted loans expected from the Gulf states, but as the FT explains, "Only $500m of some $7bn of promised aid from Saudi Arabia and the United Arab Emirates have arrived so far."
Almost 60% of Egyptians live in rural areas, yet the country imports half its caloric consumption and spends $5.5 billion a year in food subsidies. When it runs out of money, millions will starve. Many already are hungry. The state-controlled newspaper al-Dostour warned on October 9 that an "insane" increase in the price of food - up 80% so far this year - has left citizens "screaming".
The newspaper added that the "current state of lawlessness has left merchants and businesses with no supervision", leading to hoarding, price-gouging and shortages. This was evident at the outset of the uprisings, and a breakdown of the country's food distribution system was evident by May, as I wrote at the time.
The Supreme Council of the Armed Forces appears baffled. Its leader, Field Marshall Hussein Tantawi, does not appear in public. Previously he ran Egypt's military industries. Prime Minister Essam Sharaf was briefly transportation minister, having taught highway engineering for most of his career.
He has spoken publicly about only one topic of political importance, namely the peace treaty with Israel, which he proposes to change, as he told Turkish television on October 8. Egypt's leaders face a crisis brewing for two generations in which the Egyptian government kept half of its population illiterate and mired in rural poverty as an instrument of social control. As ElBaradei warns, they have no idea what they are doing.
Syria, meanwhile, is in civil war, which may turn into a proxy war between the Sunni powers and Iran. And Iraq's leader Nuri al-Maliki, the leader of the supposed Iraqi democracy we spent a trillion dollars and 4,000 lives to put in place, is backing the Bashar al-Assad regime in alliance with Iran.
Turkey, the self-styled rising power in the region, is about to get its come-uppance in the form of a nasty economic downturn. Prime Minister Recep Tayyip Erdogan's belligerence has risen in inverse proportion to the market price of the Turkish lira:
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I warned in August of the "instant obsolescence of the Turkish model" as the credit bubble engineered by the ruling party explodes. Markets have already anticipated a sudden turnaround in the Turkish economy. The lira fell by a quarter between November 2010 and September 2011, making it the world’s worst-performing emerging market currency. The stock market has fallen in dollar terms by 40%, making Turkey the worst performer after Egypt among all the markets in the MSCI Tradable Index during 2011.
A hard landing for Turkey has now become the Wall Street consensus. "Goldman Sachs Group Inc added Garanti to its focus sell list, saying the stock's gain last month was based on optimistic macroeconomic assumptions that don’t account for a 'relatively high probability' of a recession," Bloomberg News reported on October 6.
The Russian brokerage Renaissance Capital and my own firm, Macrostrategy LLC have published warnings about the Turkish banking system, which has increased lending at a 40% annual rate for the past couple of years.
In short, there is not a patch of ground in Israel's proximity that is not roiling and boiling with political and economic turmoil. Echoing in the ears of Israel's leaders are the words of Isaiah (57:20-21), which Jews around the world read on October 8 on the Day of Atonement: "The wicked are like the troubled sea, when it cannot rest, whose waters cast up mire and dirt. There is no peace, saith my God, to the wicked."
Spengler's corollary states: Neither is there peace to the stupid. We have Nicholas Kristof writing in the October 6 New York Times: "Now it is Israel that is endangered most by its leaders and maximalist stance. Prime Minister Benjamin Netanyahu is isolating his country, and, to be blunt, his hard line on settlements seems like a national suicide policy. Nothing is more corrosive than Israel’s growth of settlements because they erode hope of a peace agreement in the future."
Kristof is talking about the Jerusalem neighborhood of Gilo, which was undeveloped land before 1967 and which every conceivable peace agreement would assign to Israel.
Nothing will appease the liberals, because if liberal social engineering can't fix the problems of the Middle East, the world will have no need of liberals. The New York Times will demand that Israel concede and apologize, as surely as a gumball will roll out of the machine when I crank in a quarter. Existential need trumps rationality, most of all among the self-styled priesthood of rationality.
For extra credit, class: If 15 million Egyptians starve to death, and all the Copts are murdered, and Syria plunges into a genocidal civil war, and Turkey kills another 40,000 Kurds, and the Iraqi Shi'ites and Iraqi Sunnis all fight to the death, whose fault will it be?
I bet you guessed right this time. Israel's, for building apartments in Gilo.
Telegraph Blogs, UK
Barack Obama looks foolish and naive in the wake of the Iran terror plot
by Nile Gardiner
The foiled plot by Iran’s Revolutionary Guards to assassinate the Saudi Ambassador to the United States is a slap in the face for the Obama administration, after its efforts to extend the hand of friendship to the brutal regime in Tehran. As Con Coughlin noted earlier, this should be a wake-up call for the White House. As it has done with Russia, the Obama presidency has attempted to “reset” relations with Iran. But with both Moscow and Tehran, Washington has failed. Both hostile powers have grown emboldened and aggressive in the face of American weakness, and Iran’s brazen attempt to kill a foreign diplomat in the capital city of the United States showcases the folly of the White House’s softly-softly approach towards the ruling mullahs.
While Washington dithers, Iran is marching closer and closer to developing a nuclear weapon, which according to some estimates is just six months away. Mahmoud Ahmadinejad continues to threaten Israel with genocide, while the Obama administration has significantly cooled relations with Jerusalem – hardly the right signal to send to a close friend and ally at a time of mounting tensions in the Middle East. In addition, Washington has been slow to condemn the widespread oppression of political dissidents in Iran, all too often choosing to turn a blind eye instead of confronting a government that savagely beats its own people.
Barack Obama’s entire approach towards Iran has been both foolish and naïve. There can be no accommodation with rogue regimes that are hell-bent on acquiring nuclear weapons, wiping its neighbours off the map, and assassinating officials on foreign soil. To fully grasp the folly of the Obama administration’s Iran policy, it is worth recalling the president’s shamelessly grovelling message to Iran soon after entering the Oval Office in March 2009. In his videotaped message “directly to the people and leaders of the Islamic Republic of Iran”, President Obama declared:
I would like to speak directly to the people and leaders of the Islamic Republic of Iran. Nowruz is just one part of your great and celebrated culture. Over many centuries your art, your music, literature and innovation have made the world a better and more beautiful place.
Here in the United States our own communities have been enhanced by the contributions of Iranian Americans. We know that you are a great civilization, and your accomplishments have earned the respect of the United States and the world.
For nearly three decades relations between our nations have been strained. But at this holiday we are reminded of the common humanity that binds us together.
Indeed, you will be celebrating your New Year in much the same way that we Americans mark our holidays – by gathering with friends and family, exchanging gifts and stories, and looking to the future with a renewed sense of hope.
Within these celebrations lies the promise of a new day, the promise of opportunity for our children, security for our families, progress for our communities, and peace between nations. Those are shared hopes, those are common dreams.
So in this season of new beginnings I would like to speak clearly to Iran's leaders. We have serious differences that have grown over time. My administration is now committed to diplomacy that addresses the full range of issues before us, and to pursuing constructive ties among the United States, Iran and the international community. This process will not be advanced by threats. We seek instead engagement that is honest and grounded in mutual respect.
You, too, have a choice. The United States wants the Islamic Republic of Iran to take its rightful place in the community of nations. You have that right — but it comes with real responsibilities, and that place cannot be reached through terror or arms, but rather through peaceful actions that demonstrate the true greatness of the Iranian people and civilization. And the measure of that greatness is not the capacity to destroy, it is your demonstrated ability to build and create.
So on the occasion of your New Year, I want you, the people and leaders of Iran, to understand the future that we seek. It's a future with renewed exchanges among our people, and greater opportunities for partnership and commerce. It's a future where the old divisions are overcome, where you and all of your neighbors and the wider world can live in greater security and greater peace.
I know that this won't be reached easily. There are those who insist that we be defined by our differences. But let us remember the words that were written by the poet Saadi, so many years ago: "The children of Adam are limbs to each other, having been created of one essence."
With the coming of a new season, we're reminded of this precious humanity that we all share. And we can once again call upon this spirit as we seek the promise of a new beginning.
Thank you, and Eid-eh Shoma Mobarak.
National Review - Editorial
First CLASS, What Next?
In a Friday bad-news dump that was a whopper even by its own standards, the Obama administration added to the announcement of a near-record annual deficit and an escalation of undeclared war in Uganda the news that the CLASS Act, an ill-conceived adjunct of the Affordable Care Act, is no more. The upshot is this: Obamacare just got a whole lot more expensive than advertised, and there is reason to believe that its Democratic architects have long known this would happen.
The Community Living Assistance Services and Support Act was the brainchild of the late senator Edward Kennedy of Massachusetts, and it was supposed to be a kind of Social Security that provided long-term care for the elderly. It figured heavily into the Democrats’ dubious accounting of the cost of the Affordable Care Act, and at the time of passage was expected to account for $70 billion out of a total $143 billion in “deficit reduction” claimed in the bill.
But that number was a lie twice over. The revenue created by CLASS—more recently projected to be not $70, but $86 billion, as the CBO’s ten-year budget window has moved forward since passage—comes in the form of insurance premiums paid to the government, which eventually would have been disbursed to cover care, not reduce the deficit. Yet Democrats designed CLASS to collect premiums for five years before paying out benefits, which made it look like it was running surpluses within the CBO’s ten-year budget window.
That would have been bad enough, but it gets worse. You see, the CLASS model was unworkable from the word “go,” coming as it did with all the features you’d expect to see in a health-care “death spiral.” The program was voluntary, meaning that those more likely to require its benefits would be more likely to enroll, and the healthier individuals required to offset the actuarial risk would stay away. This adverse-selection problem would mean higher premiums, and higher premiums would mean more adverse selection. As a result, CLASS was projected—by the government’s own chief Medicare and Medicaid actuary—to begin paying out more in benefits than it took in in premiums just ten years after it got off the ground.
This was not a secret. To anybody who had bothered to do the math, it was a simple reality. But reality is not the strong suit of the Obama administration, and so it has spent the last year and a half charging the Department of Health and Human Services with the impossible: figuring out a way to make CLASS actuarially sound over a 75-year horizon while maintaining the minimum benefits of the program prescribed by law. When HHS downsized CLASS’s chief actuary last month, we might have had a hunch as to how this exercise had turned out. But it wasn’t until today that HHS Secretary Kathleen Sebelius made it official, telling Congress in a letter that “despite our best analytical efforts,” no implement was found that could cut the Gordian Knot. As Sebelius’s deputy Kathy Greenlee (under)stated it: “We found some tension between those two objectives. The things we could do to achieve actuarial soundness take us too far from the law.”
In other words, the United States Congress passed, and the president of the United States signed, a piece of politically convenient legislation that was essentially—that is, mathematically, logically—unworkable, and were either too foolish to realize it, or too cynical to care.
But even as we marvel at the perfidy of our leaders, conservatives have something to cheer in this failure. This is the first major component of Obamacare to collapse under its own weight, but by no means is it likely to be the last. The law is replete with nonsensical economic assumptions and shameless gimmicks. Democrats may have hoped these would not start to become clear until after the 2012 election, but we now already have a good idea of what the world will look like under Obamacare: waivers for the politically connected, rising premiums for the rest of us, and massive spending programs that can’t survive their own assumptions. The fact that much — even all — of this was was predicted by conservative opponents of the law should give its supporters cause to look back at what else was portended. Be sure that there is more to come, with far more harmful consequences, unless the bill is repealed.
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Nearly 8-in-10 Americans now see country on the wrong track
by Andrew Malcolm
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Somehow, 16% of likely American voters still believe the country is doing swell.
Rescue teams are out looking for them right now.
Sixteen percent is not much of a political base for President Obama to build a 2012 reelection campaign on. In fact, the right track number is down two more points just since last week and down 16 points since last October.
Things could be worse. It could be 14% happy folks as it was back in August when times were so tough for millions of Americans that the president delayed his newest job creation program a month to take an island vacation.
The Democrat has 391 days left to convince nearly eight-out-of-ten wrong-track-believing U.S. voters that 9.1% unemployment, nearly zero economic growth and a national debt still ballooning despite all those rancorous negotiations last summer are not as bad as they seem to most sentient beings.
The new Rasmussen Reports survey points out the current important right track-wrong track trend is in stark contrast to the optimistic start of the Obama term back in 2009, when right-track climbed as high as 40%.
However, since the sixth month of his White House lease Obama's right track number has been on the southbound track.
Not surprisingly, perhaps, 91% of Republicans believe the country is on the wrong track.
Ominously, though, fully 80% of independents, so crucial to any president's election, are now convinced the country is on the wrong track.
And a substantial majority of Democrats, those expected to be the most loyal to the Chicagoan, are also now thinking wrong track by 59%.
Time for the Real Good Talker to give some more speeches.
Obama’s Weakness in Historical Context
By Karlyn Bowman and Andrew Rugg
President Obama is in deep political trouble. While that's hardly news—the president's approval rating sits at 40 percent in the latest Gallup poll—the picture is much bleaker than that figure would suggest. Comparing President Obama to other incumbent presidents at this point in the campaign on a variety of indicators shows how grim the picture is for the 44th president.
Just 11 percent of respondents say they are satisfied with the way things are going in the country in Gallup’s most recent poll. Only Jimmy Carter had numbers like this: In November 1979, 19 percent reported they were satisfied with the way things are going in the country.
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In the latest ABC/Washington Post poll, 20 percent say the country is heading in the right direction, while 77 percent think it’s on the wrong track. Again, Carter had similar numbers (16 percent right direction, 77 percent wrong track). In early 1996, Bill Clinton was also about where Obama is today (21 percent right direction, 77 percent wrong track).
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Job approval numbers don’t look good for President Obama, either. Only Jimmy Carter had a lower rating.
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The University of Michigan's Consumer Confidence Index looks particularly bleak for the president. Consumer confidence in August 2011 was 55.7. This is by far the lowest rating ever at this point in recent presidents' tenures.
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Gallup regularly asks Americans if they think they are financially better off than they were a year ago. In the latest asking, only 28 percent think they are better off, 45 percent worse off, and 26 percent say they are about the same. Both Carter (30 percent better off) and George H.W. Bush (26 percent better off) had similarly poor marks on this question.
In 1983, Ronald Regan had to combat negative assessments of people’s financial situations that are similar to Obama’s marks today. In June of 1983, only 28 percent described themselves as financially better off, 39 percent worse off, and 32 percent the same. But the economy improved significantly by the time the election rolled around. Unemployment declined from 10.4 percent in January 1983 to 7.4 percent in October of 1984.
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An incumbent president can overcome negative evaluations of the country as a whole (like Clinton and “wrong track” polling) or poor assessments of people’s financial situation (like Reagan and “financially better off” attitudes). But overcoming all of these negative assessments would be unprecedented for an incumbent president since pollsters regularly began asking these questions in 1971. Right now, President Obama has far more in common with incumbent presidents who lost their bid for reelection than with the winners.
Karlyn Bowman is a senior fellow at the American Enterprise Institute, where Andrew Rugg is a research associate.
Forbes
Silicon Valley Can No Longer Save California -- Or The U.S.
by Joel Kotkin
Even before Steve Jobs crashed the scene in late 1970s, California’s technology industry had already outpaced the entire world, creating the greatest collection of information companies anywhere. It was in this fertile suburban soil that Apple — and so many other innovative companies — took root.
Now this soil is showing signs of exhaustion, with Jobs’ death symbolizing the end of the state’s high-tech heroic age.
“Steve’s passing really makes you think how much the Valley has changed,” says Leslie Parks, former head of economic development for the city of San Jose, Silicon Valley’s largest city. “The Apple II was produced here and depended on what was unique here. In those days, we were the technology food chain from conception to product. Now we only dominate the top of the chain.”
Silicon Valley’s job creation numbers are dismal. In 1999 the San Jose-Sunnyvale-Santa Clara area had over 1 million jobs; by 2010 that number shrank by nearly 150,000. Although since 2007 and early 2010 the number of information jobs has increased substantially — up roughly 5000 to a total of 46,000 — the industrial sector, which still employs almost four times as many people as IT, lost around 12,000. Overall the region’s unemployment stands at 10%, well above the national average of 9.1%.
This is partly because Apple, Intel and Hewlett-Packard have shifted their production — which offered jobs to many lower- and medium-skilled Californians — to other states or overseas. With its focus just at the highest end, the Valley no longer represents the economically diverse region of the 1970s and 1980s. Indeed, it increasingly resembles Wall Street — with a few highly skilled employees and well-placed investors making out swimmingly.
“Silicon Valley has become hyper-efficient; the region doesn’t create jobs anymore,” says Tamara Carleton, a locally based fellow at the Foundation for Enterprise Development. “In terms of revenue per employee, Facebook’s ratio is unprecedented. Even Apple hasn’t grown significantly this last decade, despite the successful launch of many products and services. While commendable, greater efficiency doesn’t put more jobs in the California economy.”
This “hyper-efficiency” can be seen in the real state of the valley’s industrial/flex space market. The overall industrial vacancy rate remains 14%, two points higher than in 2009. Areas close to Stanford, such as Palo Alto and Mountain View, have done well, but others on the periphery, such as Gilroy, Milpitas and Fremont, and even parts of San Jose have vacancies reaching over 20%.
California’s other high-tech centers, with the possible exception of San Diego, are doing worse. The state has been losing high-tech employment over the past decade, while such employment has surged not only in China and Korea, but also in competitor states such as Texas, Virginia, Washington and Utah. According to the annual Cyberstates study, California lost more high-tech jobs — about 18,000 — last year than any other state.
California’s political leaders, particularly Democrats, still genuflect toward the Valley for economic salvation and job growth. But social media has not proved a jobs-creating dynamo, and it’s clear that the highly subsidized, venture backed “green economy” has floundered miserably and faces a less than rosy future.
You can feel pride, as an American and Californian, in the legacy of the likes of Steve Jobs but also believe our future cannot be salvaged by high-tech alone. Many of the country’s greatest assets, for example, are physical; in California these include the best climate for any advanced region in the world, fertile soil, a prime location on the Pacific Rim and potentially huge fossil fuel energy reserves, which give it enormous competitive advantages.
The green theocracy now in control of Sacramento, however, has little interest in these aspects of California. It may prove difficult , if not impossible, to modernize the ports of Los Angeles and Long Beach, prolific sources of good-paying white and blue collar jobs. These ports will soon face increased competition for Asian trade from Gulf and south Atlantic locales eagerly waiting for the 2014 widening of the Panama Canal.
Administration officials such as Energy Secretary Steven Chu also slate the state’s agriculture for demise by climate change. But just in case he’s wrong, we should note that California’s agriculture — despite green attempts to cut off its water supply — accounts for 40% of state exports. It generates $12.7 billion annually in overseas sales and employs over 400,000 people directly and many thousands more in marketing, processing and warehousing.
Similarly, California boasts some of the nation’s richest deposits of oil and gas, not only on its sensitive and politically nettlesome coast but along the coastal plains and in the Central Valley. The most recent estimates of the state’s reserves, according to the Energy Information Agency, include nearly 3 billion cubic feet of natural gas and more than three billion barrels of oil, roughly the same as Alaska and more than booming North Dakotas.
Geologists and wildcatters, usually ahead of the game, believe we have touched only a small part of the state’s energy potential. Some discuss new oil shale discoveries, particularly in the Monterey region, that could dwarf even the massive Bakken find in North Dakota. “If you were in Texas,” quipped economist Bill Watkins to an audience in the hard-hit central California town of Santa Maria, a predominately Latino town north of Santa Barbara, “you’d be rich.”
A judicious and carefully planned expansion of these resources, particularly in the less populated interior areas, could provide tens of thousands of high-paying jobs. It would also funnel desperately needed revenue to the state. At the same time, such development could forestall much higher energy costs, one of the things driving manufacturers in the state to move elsewhere.
California is unlikely to take advantage of its physical bounty; its leadership seems to lack enthusiasm for any industrial expansion outside of the “green” economy. Industrial parks across the state are emptying, more houses go into foreclosure and local governments wither on the vine. Unless California begins to take its own economy seriously, it will continue to devolve from the aspirational place that produced not only Steve Jobs but scores of entrepreneurs in everything from movies and oil to agriculture and aerospace.
The Valley itself will likely do fine. Steve Jobs helped cement the position of Santa Clara Valley as the epicenter of the high-tech world. But this accomplishment does relatively little for the rest of California. What we will miss will not only be Steve Jobs’ creative contributions, but how clearly his opportunistic, entrepreneurial spirit has ebbed away from the Golden State.
San Francisco Chronicle
Pop goes the bubble of Obama's phantom green jobs
by Debra J. Saunders
Before the Senate failed to pass his American Jobs Act Tuesday, President Obama made a last-ditch speech to talk up his troubled bill. But not once did Obama mention "green jobs" - his erstwhile jobs of the future.
Smart move. Obama's $787 billion 2009 stimulus package included $500 million for green-jobs training programs that were supposed to create new middle-class jobs for thousands of Americans. Last month, however, the Department of Labor's inspector general conducted an audit that found, as of June 30 with one-third of the funds spent and more than 50,000 participants, that only 10 percent of trainees were placed in jobs. And only 1,336 participants (or 2 percent) had held jobs for six months or longer.
The audit reported that grant recipients "expressed concerns that green jobs had not materialized and job placements into subsidized employment had been much less than expected." The inspector general recommended that the Labor Department cut its losses and run. Couched in Washington-speak, the audit advised that the department reassess grants and "obtain an estimate of funds each grantee will realistically spend given the current demand for green job-related skills," so that whatever is left of the remaining $327 million can be put to better use.
Sen. Chuck Grassley, R-Iowa, who requested the audit, concluded, "The administration continues to push good money after bad into so-called green jobs."
If you can't help but think of Solyndra, the Fremont solar company that filed for bankruptcy after burning through a $528 million federal loan, go to the head of the line.
I feel for trainees who sign up with the expectation that, despite the jobless recovery, they'll land a good job and launch a stable career. The audit suggests that many will be sorely disappointed.
Employment and Training spokesman David Roberts noted that the oldest programs started in late 2009, so the audit comes "too early." Some 39 percent of trainees were already employed and enrolled in training to retain or upgrade their skills. Of 26,000 who completed training, Roberts said, 52 percent of those who were unemployed found a job.
That's an F.
But while the audit noted an increase in completed training in the last three quarters, it found, "At this point, there is no evidence that grantees will effectively use the funds and deliver targeted employment outcomes by the end of the grant periods."
Grassley has fought Washington's efforts to expand the definition of "green jobs" so that it now includes financial analysts, public relations specialists, reporters and correspondents.
The green lobby has tried this tack before. The Brookings Institution also employed a generous definition and still had to report that between 2003 and 2010, green jobs grew at a slower rate (3.4 percent annually) than the national economy (4.2 percent).
Grassley rightly argues, "Instead of focusing more money on this failed program, we need to focus on job creation in all sectors of the economy."
Unfortunately, the White House thought that it could stimulate the economy by rewarding favored donors and pet green causes, only to find that one can't build an economy recovery on a bubble of phantom jobs.
WSJ
Wall Street's Gullible Occupiers
The protesters have been sold a bill of goods. Reckless government policies, not private greed, brought about the housing bubble and resulting financial crisis.
by Peter J. Wallison
There is no mystery where the Occupy Wall Street movement came from: It is an offspring of the same false narrative about the causes of the financial crisis that exculpated the government and brought us the Dodd-Frank Act. According to this story, the financial crisis and ensuing deep recession was caused by a reckless private sector driven by greed and insufficiently regulated. It is no wonder that people who hear this tale repeated endlessly in the media turn on Wall Street to express their frustration with the current conditions in the economy.
Their anger should be directed at those who developed and supported the federal government's housing policies that were responsible for the financial crisis.
Beginning in 1992, the government required Fannie Mae and Freddie Mac to direct a substantial portion of their mortgage financing to borrowers who were at or below the median income in their communities. The original legislative quota was 30%. But the Department of Housing and Urban Development was given authority to adjust it, and through the Bill Clinton and George W. Bush administrations HUD raised the quota to 50% by 2000 and 55% by 2007.
It is certainly possible to find prime borrowers among people with incomes below the median. But when more than half of the mortgages Fannie and Freddie were required to buy were required to have that characteristic, these two government-sponsored enterprises had to significantly reduce their underwriting standards.
Fannie and Freddie were not the only government-backed or government-controlled organizations that were enlisted in this process. The Federal Housing Administration was competing with Fannie and Freddie for the same mortgages. And thanks to rules adopted in 1995 under the Community Reinvestment Act, regulated banks as well as savings and loan associations had to make a certain number of loans to borrowers who were at or below 80% of the median income in the areas they served.
Research by Edward Pinto, a former chief credit officer of Fannie Mae (now a colleague of mine at the American Enterprise Institute) has shown that 27 million loans—half of all mortgages in the U.S.—were subprime or otherwise weak by 2008. That is, the loans were made to borrowers with blemished credit, or were loans with no or low down payments, no documentation, or required only interest payments.
Of these, over 70% were held or guaranteed by Fannie and Freddie or some other government agency or government-regulated institution. Thus it is clear where the demand for these deficient mortgages came from.
The huge government investment in subprime mortgages achieved its purpose. Home ownership in the U.S. increased to 69% from 65% (where it had been for 30 years). But it also led to the biggest housing bubble in American history. This bubble, which lasted from 1997 to 2007, also created a huge private market for mortgage-backed securities (MBS) based on pools of subprime loans.
As housing bubbles grow, rising prices suppress delinquencies and defaults. People who could not meet their mortgage obligations could refinance or sell, because their houses were now worth more.
Accordingly, by the mid-2000s, investors had begun to notice that securities based on subprime mortgages were producing the high yields, but not showing the large number of defaults, that are usually associated with subprime loans. This triggered strong investor demand for these securities, causing the growth of the first significant private market for MBS based on subprime and other risky mortgages.
By 2008, Mr. Pinto has shown, this market consisted of about 7.8 million subprime loans, somewhat less than one-third of the 27 million that were then outstanding. The private financial sector must certainly share some blame for the financial crisis, but it cannot fairly be accused of causing that crisis when only a small minority of subprime and other risky mortgages outstanding in 2008 were the result of that private activity.
When the bubble deflated in 2007, an unprecedented number of weak mortgages went into default, driving down housing prices throughout the U.S. and throwing Fannie and Freddie into insolvency. Seeing these sudden losses, investors fled from the market for privately issued MBS, and mark-to-market accounting required banks and others to write down the value of their mortgage-backed assets to the distress levels in a market that now had few buyers. This raised questions about the solvency and liquidity of the largest financial institutions and began a period of great investor anxiety.
The government's rescue of Bear Stearns in March 2008 temporarily calmed the market. But it created significant moral hazard: Market participants were led to believe that the government would rescue all large financial institutions. When Lehman Brothers was allowed to fail in September, investors panicked. They withdrew their funds from the institutions that held large amounts of privately issued MBS, causing banks and others—such as investment banks, finance companies and insurers—to hoard cash against the risk of further withdrawals. Their refusal to lend to one another in these conditions froze credit markets, bringing on what we now call the financial crisis.
The narrative that came out of these events—largely propagated by government officials and accepted by a credulous media—was that the private sector's greed and risk-taking caused the financial crisis and the government's policies were not responsible. This narrative stimulated the punitive Dodd-Frank Act—fittingly named after Congress's two key supporters of the government's destructive housing policies. It also gave us the occupiers of Wall Street.
Mr. Wallison is a senior fellow at the American Enterprise Institute. He was a member Financial Crisis Inquiry Commission and dissented from the majority's report.
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