Quote of the Day
I can't give you a sure-fire formula for success, but I can give you a formula for failure: try to please everybody all the time.
Herbert Bayard Swope
More Sunday Talk Soup
White House Chief of Staff Bill Daley on Meet the Press Sunday signaled a willingness to consider a release of oil from the strategic oil reserves as progressive Democratic senators have predictably attempted to demagogue higher oil prices. (THUMBS WAY, WAY DOWN!) Nothing like delusional progressives wanting to abuse the power of the government to manipulate prices--have we learned nothing from the experience of the 111th Congress trying to micromanage the economy, e.g., auto bankruptcy, Cash for Clunkers? We have to consider WHY oil prices spike over the endangerment of only 2% of oil supply on the market (i.e., Libya supply to market issues): it has to do with a limited lack between supply and demand; last year saw the largest surge in demand in decades, and we are looking at maybe a handful of million barrels a day extra capacity in Saudi Arabia. India, with a rapidly growing middle class, has new cars selling below $5000, is an oil importer, and is building a strategic reserve; China (with up to seventeen or more lane highways) is also grabbing oil wherever it can find it: Canada, Venezuela, Iran, Africa, etc. and continuing to fill its reserve.
There was reason to release some oil from the reserve in 2005 after the Katrina disaster, which caused a supply interruption from the Gulf, accounting for about a third of our production. But what has happened here is not the result of the maturing domestic production being interrupted--it's the result of counterproductive policies all but banning oil exploration off our coastal areas, several promising areas in Alaska, and, of course, the Gulf of Mexico. Not to mention promising shale properties in the western-central-northern region of the country, largely off-limits because of incessant environmentalist lawsuits. Then, of course, there is the morally and legally indefensible moratorium where the Obama Administration is basically stonewalling drilling permits, defying federal judges. Every single barrel of the 75% or so balance of the 20-million barrels or so of daily consumption we do not produce domestically has to be bid for against the developing economies like China and India, not to mention developed nations with little if any domestic production (e.g., Japan).
The Administration is trying to have its cake and eat it, too. To be honest, Barack Obama isn't really upset at high prices forcing Americans to conserve their energy use (or provide a natural incentive to purchase energy-efficient vehicles). The problem is--the more money we have to pay for foreign-produced oil, the less we have to spend on domestic produced goods and services.
Let me quite clear: if the Democrats seriously wanted to put the squeeze on oil speculators, they would immediately open up both coasts for drilling, liberate Alaskan exploration, and end Gulf drilling moratoriums. Are they about to abandon their environmentalist cronies? I'm not holding my breath.
Modest Signs for a Made in America Comeback?
One of the topics in yesterday's ABC This Week had to do with showing how few things we Americans actually produce show up in our homes. They went through some viewer homes and found, in one case, the only American-produced item was a high-end kitchen appliance. Almost everything else was made elsewhere.
I remember when Wal-Mart used to push "Made in America". But trade normalization to a certain extent led to a Chinese factory gold rush. There seems to be some correction in the groupthink; we shouldn't exaggerate the trend of in-sourcing (make no mistake: the Chinese are tough competitors and they'll try to address the reasons for in-sourcing in order to win back the business).
Let me briefly promote one of my favorite blogs: Carpe Diem, published by University of Michigan finance/economics professor Mark J. Perry. Dr. Perry points out last year we saw the first increase in US factory hiring since 1997. Why is it happening? Let me summarize some the reasons Dr. Perry discusses, in conjunction with Brendan Koerner's "Made in America: Small Businesses Buck the Offshoring Trend":
- Decreasing foreign production cost advantages (labor and shipping cost increases), appreciating Chinese currency
- Labor-saving product redesign and advancements in robotic technology
- More control over the production process (e.g., the use of inconsistent quality subcontractors)
- Delays in production setups/time-to-market
- Unsatisfactory Chinese protection of intellectual property rights
- Poor quality product materials or assembly, adversely affecting corporate image and costs
- Need for more flexible manufacturing approaches to market
- Interest in integrating design and production processes locally
Let us be clear here: we are not talking about the return of large numbers of low-skill, high-pay jobs any time soon (if ever). We are talking about more specialized technical skills (e.g., robotic system operations and maintenance), broader, value-added knowledge and operational skills, etc.
I want to close this segment with a disagreement with ABC News/commentary: there was a discussion of Germany's strong export market. In fact, we should note that Germany, with just over a quarter of the US population, exports more than the US. Somebody suggested that it had to do with Germany's industrial policy--and the lack of industrial policy in the US (I almost spat out my coffee when I heard that). Can you say "crony capitalism"? The last thing we need is something as stupid as (say) an American President trying to run a car company, an insurance company, or mortgage banker. (Whoops!) Let me rephrase it: if you were going to hire an executive, who would you hire--someone who by the end of this third fiscal year in September had piled up over a $4T debt? Even Ponzi schemer Bernie Madoff didn't do that...
In part, keep in mind that many American corporations have production facilities in other countries and so to a certain extent the comparison of America's close third-place finish to Germany is apples to oranges. But how do we produce more of the consumer products we purchase? Well, it (and the above specified recovery) has absolutely ZERO to do with Obama's high-sounding rhetoric, preaching innovation, setting up dubious targets of doubling exports (in fact, we did better than the prorated rate just last year).
Obama can achieve export growth through a number of policies he, in fact, has constantly rejected: lower business tax rates, simplify the tax code, encourage savings and investment, streamline regulations, minimize reporting and miscellaneous mandates.
For Shame: Take Bell, CA and Think New York Public Schools
Syosset Central School District Superintendent Carole Hankin earns a $386K base salary, with lush benefits resulting in a total $506K package. Some 39 subordinate administrators start at $118K in salary. The English teacher union president pulls in just under $130K, with one gym teacher earns $145K. Granted, this is a rich district; high school students have the option of taking language classes in Japanese or Russian.
You will be relieved to know that while thousands of teachers are losing their jobs in New York state and elsewhere, Ms. Hankin is doing her fair share to save money for the taxpayer--she has decided not to ask for a raise this year...
Governor Cuomo is seriously considering an austerity measure for superintendents outside NYC: $179K. Poor dears living off the dole: maybe they'll qualify for discounted lunches at the school cafeterias...
Political Humor
"Charlie Sheen said that he's now more popular than President Obama, at which point Mike Huckabee accused him of growing up in Kenya." –Jay Leno
[President Obama had better watch out: Charlie is looking for a new job. Charlie's dad only played a Democratic President on TV; think Josiah W. Bartlet. Charlie's slogan: "Winning!" He's going to take America on a ride, put tiger blood in her tank... Can you imagine two Goddesses in the White House?]
Iranian President Mahmoud Ahmadinejad has sold his 1977 Peugeot 504 for 2.5 million at an auction. It even came with the phone books he has to sit on to drive it. - Jay Leno
[And the gas to run it sold for 2.75 million....No, thanks. I'm waiting for the Ahmadinejad on Velvet series to come out...]
Musical Interlude: My Favorite Groups
The Bee Gees/Andy Gibb, "Shadow Dancing". The last of Andy Gibb's #1 hits, it was co-written by all 4 of the brothers.
