The administration's plan to consolidate financial regulators seems OK as far as it goes. But it doesn't seem to go very far.

Business Week economist Michael Mandel:

Let’s see. In the middle of perhaps the greatest financial upheaval since the Great Depression, Treasury Secretary Hank Paulson is proposing a change in financial regulations which basically amounts to a big wink to Wall Street. His plan will go nowhere, both for political and practical reasons. In fact, it does not even meet the minimum standard of improving transparency, which would reduce the possibility of a similar crisis in the future.

The main point of the Paulson plan is to make regulation more efficient.

NYT columnist/economist Paul Krugman:

Anyone who has worked in a large organization — or, for that matter, reads the comic strip “Dilbert” — is familiar with the “org chart” strategy. To hide their lack of any actual ideas about what to do, managers sometimes make a big show of rearranging the boxes and lines that say who reports to whom.You now understand the principle behind the Bush administration’s new proposal for financial reform, which will be formally announced today: it’s all about creating the appearance of responding to the current crisis, without actually doing anything substantive.

Dandelion Salad:

You can be sure that in order to justify their existence, the reorganized agencies, as well as such new ones as the MOC and OIO, will issue a plethora of new regulations that will have the net effect of constricting credit for the average person, because the underlying judgment of frowning officialdom is that the cause of the current housing crisis is how easy financiers made it for ordinary people who had the audacity to want to purchase homes. By contrast, the plan would assure that such “innovations” as those by which the lenders themselves have been famously packaging and re-selling mortgages and other debt instruments as investment securities will continue unimpeded.

Dealbreaker:

We’re going to have a lot to say about the costs of Treasury Secretary Hank Paulson’s Blueprint for a Modernized Financial Regulatory Structure. Before that, however, it’s worth noting that there is little to admire about our current financial regulatory structure. Largely a product of the financial crises of the past, the structure was unwieldy, arguably created a bureaucratic structure at odds with the constitutional framework of our Republic and tended to serve the interest of the very financial institutions it sought to regulate at the expense of individual investors and the broader public.

Robert Reich:

It’s being called the broadest overhaul of Wall Street regulation since the Great Depression. But look closely at the proposal announced this morning by Treasury chief Hank Paulson, and you’ll find a thin veneer of regulatory filagree -- designed to appease a public outraged by the mismanagement of its savings and the taxpayer-financed bailout of Wall Street’s well-padded executives, but also, sadly, designed to accomplish just about nothing.

Blogging Stocks:

This is only a first step in the process. Many government agencies will be merged to create even more powerful agencies. However, the key element that stands out in Secretary Paulson's proposal is the new role of the Federal Reserve as a regulatory "Supercop." In essence, the proposal makes the Fed formally responsible for the risk management of our financial system. This would be the third mandate for the Federal Reserve after price stability and full employment.

Posted by Jay Hancock at 2:08 PM | Permalink | Comments (0)
                    

Professors at MIT and Stockholm University find that congressional districts with little press coverage tend to elect representatives who are less independent, less well-known to voters and less likely to bring home pork projects. Their paper is published by the National Bureau for Economic Research. Newspapers make democracy -- with its virtues and faults -- work.

Voters living in areas with less coverage of their U.S. House representative are less likely to recall their representative's name, and less able to describe and rate them. Congressmen who are less covered by the local press work less for their constituencies: they are less likely to stand witness before congressional hearings, to serve on constituency-oriented committees (perhaps), and to vote against the party line. Finally, this congressional behavior affects policy. Federal spending is lower in areas where there is less press coverage of the local members of congress.

Posted by Jay Hancock at 11:55 AM | Permalink | Comments (0)
                    

Although online help-wanted ads fell nationally in March compared with those of March 2007, in Maryland the picture looks much better. Online Maryland employment ads rose 15 percent for the period, suggesting that local companies are willing to hire and that the state is avoiding recession. The figures are from the Conference Board.

Maryland's results contrast with those in states such as California (online help-wanted ads down 17 percent), Florida (down 10 percent) and Oregon (down 25 percent.) Maryland has the fifth-highest demand for labor in the United States, says the economic research organization. And because of its low unemployment rate, Maryland had the lowest imbalance in the country between available positions and the number of people seeking work.

Posted by Jay Hancock at 11:03 AM | Permalink | Comments (0)
                    

The Conference Board says this morning that the number of online employment ads declined this month compared with the level in March 2007. That was the first year-over-year decline since the organization began tracking online ads in 2005. Online employment ads have grown like topsy in the last decade in The Sun, CareerBuilder and Monster. That they seem to be topping out says something about the maturity of the market. But it also says something about the economy. Employers who are laying off workers or hiring less buy fewer help-wanted ads.

“The softening in advertised vacancies evident over the last few months spread to more states in March and, for the first time, annual growth turned negative for the nation as a whole,” said Gad Levanon, Economist at The Conference Board. “It would not be surprising to see a third straight month of job losses when employment data are released later this week as well as continued weakness in the months ahead. The weak demand for labor and a soft employment market help explain the significant decline in the Consumer Confidence Index released last week, which dropped to 64.5, its lowest level since 2003.”

Posted by Jay Hancock at 10:36 AM | Permalink | Comments (0)
                    

The fine print has been posted on the PSC's Web site.

One interesting detail. Page 5 days Constellation "will prioritize the development of a new nuclear plant at Calvert Cliffs over the development of a nuclear facility at any other site it controls, provided that all things are equal, including, but not limited to, regulatory approvals and acceptable financing."

All things are never equal.

Posted by Jay Hancock at 1:24 PM | Permalink | Comments (2)
                    

This email from Environment Maryland's Brad Heavner a propos of Wednesday's column on the Sparows Point steel mill:

What I dispute in your recent column on the Sparrows Point steel mill is that the global warming legislation now being debated would lead to a carbon tax covering industrial sources. You leap straight to that assumption and base the whole argument on it, but it's really not the case to begin with.

The bill is fundamentally a planning process for clean energy policies.
These policies are all things we're talking about already -- green building standards; supporting small, local power generators; transit-oriented development; energy efficiency opportunities of all sorts; dozens of small initiatives to inject a low-carbon mentality into all of our public policy. The bill sets deadlines for making decisions and getting policies in place. It will make sure our transition to a clean energy economy is smooth.

The policies developed between now and 2012 will have to result in a projected reduction in pollution of 25% from the 2006 level by 2020.
This is the course we need to be on to address the potentially devastating impacts of global warming, and doing it in ten states will spur the federal government to match it.

Can we do that without taxing manufacturing? You bet. And, as you point out, we have to.

If we impose a tax on steel that drives Severstal out of Maryland, it would result in increased greenhouse gas emissions because more of our steel would be made in places without good environmental standards and would be transported over long distances. That would make no sense. I would be the first to object.

Fortunately, there are plenty of other strategies for reducing greenhouse gas emissions. Take a look at our report from last June that offers one scenario. The Maryland Commission on Climate Change is refining details on 53 policy recommendations, and a blanket carbon tax is not one of them. (Our report is at http://www.environmentmaryland.org/reports/global-warming/global-warming
-program-reports/a-blueprint-for-action-policy-options-to-reduce-marylan
ds-contribution-to-global-warming)

It would be a great benefit to Maryland's economy to be ahead of the curve in addressing global warming. Maryland stands to create an entirely new arm to its economy and infrastructure. As the transition to clean energy occurs, we want to be part of creating it and profiting from the opportunity. The entire world is looking for solutions that Maryland can play a big role in providing.

Posted by Jay Hancock at 12:05 PM | Permalink | Comments (1)
                    

-- The direct amount -- over $500 million -- is enough to cause pain for Constellation and enough for O'Malley to claim he got significant $$$ for consumers.

-- O'Malley didn't have much ammo to work with. The 2006 law requiring the $386 million in credits was embarrassingly unconstitutional. Nor did the review of the 1999 stranded-cost settlement offer much ground for revisiting. Judges would have laughed efforts to regain stranded cost money out of court.

-- However, as noted in today's column, he didn't deploy what potentially was his biggest gun: an investigation into the 2005-2006 electricity auction that led to the 70 percent BGE increase.

-- Constellation buys political peace with the settlement. Did they also forestall the auction inquiry? We'll find out next week.

-- O'Malley gets Constellation to stop threatening to put their next nuclear plant somewhere other than Maryland. He had two opposing goals: 1) Look as though he redeems his promise for rate relief by beating up Constellation and getting money. 2) Secure Maryland's energy future. No. 1 is important. No. 2 is more important.

Posted by Jay Hancock at 10:52 AM | Permalink | Comments (2)
                    

Silver lining department: Gas is $3.20 a gallon. Milk is $4. Electricity has nearly doubled in recent years.

Is everything getting more expensive? No. Although inflation appears to be back in a big way, there are still significant deflationary forces in some parts of the economy. As long as overseas wages are lower than in the United States, as long as technology keeps improving electronic devices, and as long as open trade allows access to world markets, many prices will fail to keep up with those for food and energy.

A quick tour of the government’s price data shows numerous items failing to match February’s overall inflation rate of 4 percent.

Televisions continue to lead the deflation parade, plunging 19 percent in price from February 2007 to February 2008. Camera prices fell 13 percent. Watch prices fell 4 percent. Also in the technology category, cell-phone service was 1 percent less expensive in February than a year before.

The other deflationary nexus is clothing and household goods. On the whole apparel prices fell 1 percent. Women’s clothing, which had been getting costlier a year ago, fell 4 percent. Carpeting, bedroom furniture and tools all fell slightly. Dishes and flatware have been getting cheaper for years and rose less than one percent in February compared with February 2007.

True, you can’t eat rugs. TV won’t fuel your car. But your dollar goes a little farther at Best Buy and Sears than at Exxon.

Posted by Jay Hancock at 7:12 PM | Permalink | Comments (0)
                    

A reader emails, in response to Wednesday's column on Sparrows Point steel mill:

My God!!! You do have a capitalistic bone in your body. Good article!

Actually, my fibia, tibia, humerus, vertebrae, cranium and fibula are all capitalistic. My patellae and clavicle are anarchist.

Posted by Jay Hancock at 12:18 PM | Permalink | Comments (0)
                    

Here is this morning's statement from Constellation Energy, parent of BGE. Here is today's story in The Sun. O'Malley is giving a press conference at 4. Some details from the Constellation release:

-- Reaffirmation by the State of Maryland of the 1999 settlement and dismissal of all ongoing PSC proceedings related to the 1999 settlement and other investigations.

-- One-time bill credit to BGE residential customers ($170 per customer), totaling $187 million.

-- Elimination of BGE ratepayer liability for decommissioning Calvert Cliffs Nuclear Power Plant in Southern Maryland.

-- Restoration of 90 percent of Senate Bill 1 credits (enacted into law during the 2006 Special Session of the Maryland Legislature) and settlement of lawsuits related to the 1999 settlement agreement ($346 million of original $386 million).

-- All things being equal, Constellation Energy will work to develop a new nuclear power plant at its Calvert Cliffs site before development at any other site it controls.

-- Modernization of Maryland's laws (PUC, Sections 6-101, 6-105) governing investment in holding companies of gas and electric utilities.

-- Strengthened PSC oversight capability through codification of federal authority to examine the books and records of any Maryland electric utility and its affiliates.

-- Enhanced corporate governance of BGE through the addition of two independent directors to the BGE Board.

-- Phase-in of future BGE Electric Distribution Rate Changes and early implementation by BGE of accelerated depreciation accrual methodology as recommended by PSC Staff in case 9096.

The first item is especially important. This is essentially a global settlement. It would put all items of contention between Constellation and regulators into one pot and put a lid on it. The customer rebate isn't much ($170). The elimination of ratepayer liability for Calvert Cliffs is a big deal. Getting another nuclear plant for Maryland is important. But O'Malley might have gotten more. More in tomorrow's column.

Posted by Jay Hancock at 11:50 AM | Permalink | Comments (0)
                    

This is from Keith Losoya, executive director if the Chesapeake Sustainable Business Alliance, in response to my Wednesday column on Sparrows Point.

I have to take issue with your your "Point's future is up to Annapolis" piece yesterday where you basically championed the singular opposition argument to the Global Warming Solutions Act and Energy Efficiency bills. In this column you joined the circle of wagons around one industry and one plant in the state of Maryland that may be negatively impacted by this bill. It's unfortunate to see that you are embracing this myopic view and ignoring the enormous economic promise that this legislation will tender.

*According to The International Center for Sustainable Development that was contracted by the Baltimore Development Corporation (BDC) with funding provided by DBED, MEA and the Abell Foundation, over the next 20 years, at the lowest level of effort (20% energy-efficiency improvement, 10% renewable-energy increase, and 10% ethanol production increase), 144,000 jobs will be created (67,000 in Baltimore), wages & salaries will go up by $5.7 billion ($2.4 billion in Baltimore); state & local tax revenues will increase by $973 million ($412 million in Baltimore); and gross state product (GSP) will increase by $16 billion ($7 billion in Baltimore).

While there are several analogies to draw from the first one that comes to mind is investing. Would you put all of your accumulated and potential earnings that are intended to sustain you and your family into one high risk venture today? I would hope not and would think that you would diversify your investments for your own fiscal security. What you are asking is for Maryland to risk it's future and diverse economic growth potential for one industry, one plant.

I represent hundreds of small businesses who have made the commitment to be more environmentally and socially responsible and welcome the opportunity to talk to you more about this issue on their behalf. I also offer the additional points below in the hope that they will provide some balance to your singular concern for Sparrows Point.

1/ The workers at Sparrows Point are understandably concerned
about their jobs, given the uncertainty around ownership of the plant.
We know that the steelworkers care about the environment and the
health of their families.

2/ The lack of certainty has minimized investment in the plant over
the past few years. This has made the Sparrows Point plant less competitive
under ArcelorMittal.

3/ Other steel producers around the world have been increasing
efficiency and improving environmental performance. They are
making these investments to reduce costs (for power).

4/ The purchase of the Sparrows Point plant by a company with
deep pockets and a commitment to invest in improved efficiency and
productivity should provide confidence to the steelworkers and
elected officials that there is a strong future for steel in Baltimore.
This is important for the environment, as shipping the steel we need
from plants across the globe is not sustainable.

5/ The federal government and top universities continue to work with
steel manufacturers to invest in research on how to make the steel
manufacturing process more efficient (by using less energy) and
more environmentally friendly.

6/ Companies like Baltimore based Ceratech, maker of environmentally
friendly and low-carbon cement products, prove that the construction
material industry can do business in a new way. Maryland leaders need
to take action to bring these forward thinking businesses like CeraTech
BP Solar, and SunEdison to our state.

7/ By passing the Global Warming Solutions Act (and energy efficiency
legislation) in Maryland, we send a strong signal to industry that we
are serious not only about protecting the environment, but also that
we want to protect and create jobs in the state and help rebuild the
City of Baltimore as Maryland takes a leadership role in the rapidly
growing clean energy economy.

8/ States such as Pennsylvania, Massachusetts, Wisconsin, California
and others are making investments in clean energy industry jobs.
Maryland must invest in these industries or other states will take
the jobs

My thoughts: I don't think Sparrows Point and other important business hurt by blanket carbon caps should have the effect of blocking all efforts to fight climate change. Focus climate-change efforts on the consumer and grandfather key businesses... I'm highly skeptical of studies showing that prospective growth in "green jobs" will replace jobs lost in dirty industries. No doubt there will be green jobs. No doubt the amount of jobs shown by these studies is exaggerated... Of course we should invest in these industries.

Posted by Jay Hancock at 9:54 AM | Permalink | Comments (1)
                    

Raised from comments. Good point by Bill Goodman:

Jay, the Sun keeps saying that the Point employs 2500 people. That number is the number directly employed by Mittal. There are actually close to 6000 people employed at the point, which included a floating number of between 3000 & 3500 contractors, and roughly another 1000 - 1200 people who's business' only function is to support this massive plant's needs.

Posted by Jay Hancock at 10:38 AM | Permalink | Comments (0)
                    

Read Kevin Drum at Washington Monthly.

In previous reports, the other-immigrant population was projected using assumed annual numbers of net other immigrants with a static age-sex distribution. For this year's report, the annual numbers of net other immigrants are projected by explicitly modeling other immigrants and other emigrants separately.

Translation: instead of just pulling a net number out of a hat, the [Social Security] trustees built a model that estimated the actual demographic characteristics of both immigrants and emigrants. And guess what?

Illegal immigrants tend to skew young. This benefits the system.

Young people have more children than older people. This benefits the system.

Some illegal immigrants pay taxes for a few years and then leave. This benefits the system.

Bottom line: "This year's report results in [...] a substantial increase in the number of working-age individuals contributing payroll taxes, but a relatively smaller increase in the number of retirement-age individuals receiving benefits in the latter half of the long-range period." Give or take a bit, it turns out that this shores up the Social Security system to the tune of around $13 billion per year. Thanks, illegal immigrants!

Posted by Jay Hancock at 10:10 AM | Permalink | Comments (0)
                    

The global economy has done its part: Russia's SeverStal has agreed to buy the Sparrows Point steel mill and invest in badly needed upgrades.

Now Maryland politicians should do theirs. If they insist on steeply taxing Sparrows Point's steelmaking process -- the upshot of global warming legislation being debated in Annapolis -- all the rubles in the world won't let the Point thrive.

The governor and General Assembly seem to get how a 6 percent tax on computer services will transport Maryland jobs elsewhere. They don't get how what may be an even bigger tax will hurt a company that employs 2,500 Marylanders at good wages.

The rest is in Wednesday's paper.

Posted by Jay Hancock at 5:55 PM | Permalink | Comments (4)
                    

I'll be on WYPR's midday show at 1 pm to talk about the economy, housing crisis etc.

Posted by Jay Hancock at 10:28 AM | Permalink | Comments (1)
                    

Verizon's FiOS cable TV and Internet service, available to numerous suburbanites but few city dwellers, is entering Manhattan, says the AP. Last summer I asked Verizon when they would hook up the city of Baltimore. "Stay tuned," a company spokeswoman said. We're still waiting...
From AP's story:

Verizon’s fiber-optic service, so far mainly available to suburbanites, is making a big push into Manhattan with a deal to connect an 11,232-unit apartment complex.

Stuyvesant Town and Peter Cooper Village, an enclave of 110 buildings on Manhattan’s East Side, is the largest apartment complex in Manhattan and the largest to get FiOS service anywhere in Verizon’s 17-state fiber buildout area.

Verizon Communications Inc. announced the deal Monday, but seven buildings are already connected. It will take some months to connect the rest.

Single-family houses have been the low-hanging fruit for the company’s $23 billion project to replace its copper phone lines with fiber optics. Connecting apartments is technically more difficult and requires permission from landlords.

Posted by Jay Hancock at 6:36 PM | Permalink | Comments (2)
                    

What I wrote five years ago in The Sun:

ON JAN. 17, 1968, President Lyndon B. Johnson told the American people that the Vietnam War was costing $25 billion annually - a great expense, he acknowledged, but necessary "until world conditions permit, and until peace is assured."

Twenty-five billion dollars was $10 billion a year more than Johnson had previously estimated, and it still wasn't accurate. Four months after his State of the Union address in January, Johnson asked Congress for an additional $4 billion for Vietnam, just for 1968.

A Texas congressman named George H.W. Bush seemed disturbed by the budgetary boundlessness.

"The nation faces - this year, just as it did last - a tremendous deficit in the federal budget, but in the president's message there was no sense of sacrifice on the part of the government, no assignment of priorities," Bush said in response to Johnson's speech.

Of course, even $29 billion a year turned out to be a mere down payment. The full financial cost of the Vietnam War would come to about $100 billion in 1968 dollars, or $430 per American, which would be worth $2,200 today.

Yesterday, President George W. Bush asked Congress for $74.7 billion for the war on Iraq - just for the next six months. (For comparison, $74.7 billion is about $14.3 billion in 1968 money.)

Senate Majority Leader Bill Frist of Tennessee told reporters that $74.7 billion was Bush's "best estimate" of the war's cost. But don't be surprised if the estimate is wrong.

Conservatives correctly observe that actions by government generally bring unintended consequences. The bigger the action, the bigger the surprising repercussions, and government programs seldom get bigger than war.

Often, one consequence of war is - more war. And more war expense.

U.S. leaders frequently misjudge the cost of hostilities, Yale economist William D. Nordhaus said in a paper published late last year.

The Civil War cost 13 times what President Abraham Lincoln's Treasury secretary had estimated, and "the costs of the Vietnam War were grossly underestimated even as the buildup occurred," Nordhaus reported, adding that "in assuming that the war would end by June 1967, the Pentagon underestimated the total cost of the war by around 90 percent."

Neither Nordhaus nor this column is arguing that the war on Iraq will turn into Vietnam-style quicksand, though that is not impossible. Wars, however, are major disturbances in the political/economic pond, often generating waves more powerful and far-reaching than anybody expects.

Nordhaus figured an Iraq war could cost between $120 billion and $1.6 trillion, with the higher figure resulting from an "unfavorable" outcome of prolonged conflict, high peacekeeping costs and a ravaged Iraqi oil industry. And Nordhaus talked only about direct expenses, debited to the U.S. Treasury. He didn't get into the interest cost on war loans or the opportunity cost of benefits that the money could have bought. He didn't mention higher interest rates, a weak dollar, a poor stock market or other possible secondary expenses.

Of course, wars often spur beneficial economic side effects, too - at least for countries that fight, as the United States usually does, in somebody else's back yard. Vietnam spending helped the U.S. gross domestic product rise by an average annual rate of 4.4 percent annually for the 10 years that ended in 1973.

But the Vietnam War also may have helped stoke the crippling inflation of the 1970s, although many economists instead blame weaker productivity gains and a Federal Reserve that tried to trade higher prices for lower unemployment.

Even so, the economic minuses of the war on Iraq may outweigh the pluses. Much of the risk involves budget deficits. The U.S. national debt is $6.1 trillion, and last year's deficit was $158 billion.

War spending will make both grow, especially with new tax cuts. If war borrowing starts to deter the foreign lenders who have enabled America's debt addiction for two decades, put down the strong dollar and low interest rates as collateral casualties.

This is an economics column, but let the record show that the biggest costs of war are human and moral. Human loss is grievous, but the moral and political expense of this war also seem very high. War is sometimes necessary, and the planet would be better with no Saddam Hussein. But sometimes the benefit of an end does not justify the price of the means.

Cost of the Tomahawk missiles launched at Iraq in the war's first week: more than $500 million. Cost of a powerful democracy attacking a country that posed no demonstrable, imminent threat to the democracy or its allies: priceless.

Posted by Jay Hancock at 2:59 PM | Permalink | Comments (2)
                    

From Brad DeLong:

There is nothing more dangerous for America's future national security, nothing more destructive to America's future prosperity, than for Chinese schoolchildren to be taught in 2047 and 2071 and in the years after 2075 that America tried to keep the Chinese as poor as possible for as long as possible.

Read the whole post here.

Posted by Jay Hancock at 12:17 PM | Permalink | Comments (0)
                    

Returning from a few days off, I have stopped the automatic "out of office reply." Can you feel all the extra bandwidth?

Posted by Jay Hancock at 10:59 AM | Permalink | Comments (0)