Reader Jim, who says he bought his house in 1993, asks:

My new assessment for my home is 22% less than it was last year. So won't my next Howard County tax bill (as of the new 7/01/2010 lower assessment) be substantially less than it was for 2009?

The answer is no, it might not be. It's true that assessed values of Maryland homes are plunging, as Larry Carson reported this week. But for many Marylanders who have owned and lived in their homes for many years, property taxes are still "catching up" to the increase in values over the last decade, which is substantial despite the recent meltdown. That's because in Howard County and elsewhere counties often don't allow property taxes to rise as fast as home values.

Let's assume Jim's house was worth $300,000 in his 2001 assessment and is a typical Howard County house. In 2007, after two triennial assessments, it would have been assessed at $625,000. In six years that's a 13 percent average annual increase!

But Jim's real estate taxes didn't go up nearly that much because, under the homestead credit, Howard County limits annual, owner-occupied home tax increases to 5 percent. So say Jim was paying $3,000 in annual tax in 2001. The highest it could have reached in six years under the homestead cap is $4020 -- an increase of only 34 percent, while the value of the home more than doubled. (The Howard County rate actually declined, but not by much. Let's just assume it stayed the same.) So Jim was never paying the fully phased-in tax liability on his house when it was assessed at $625,000. That's why he may not see much if any tax reduction now that his assessed value has plunged 22 percent.

Even with the 22 percent drop, Jim's house would still be worth $487,000. That represents annual value appreciation of 5.5 percent, compounded, since 2001, which is still more than the increase he's seen in property tax. So he and other Howard Countians like me who just got reassessed may even see a slight tax increase this year, not a decline.

Posted by Jay Hancock at 6:30 AM | Permalink | Comments (1)
Categories: Real estate
        

The Hancock family ordered 50 Christmas cards this year and sent out like 35, mostly to out-of-towners. That puts us above average according to the informal research done by Agnostic at Dusk in Autumn. But we've transformed the card-sending routine from an annual thing to biennial, so an an average annual basis we're closer to the national tendency in the chart below.

There are various hypotheses for the cause of the decline. Is it email? Facebook? The recession? Or are we less religious?

Says Agnostic:

Using Lexis-Nexis, I found an estimate of 26 Christmas cards for 1990, so that the number of all holiday greeting cards would have been a bit above -- probably around the 1987 level of 29 cards across all holidays. The first big drop is visible by 1994, when the number of cards received per household was about 25% lower than in 1987. There was another drop-off starting in 2003, and during the most recent years of 2007 and 2008, the number is down about 40% from the late '80s / early '90s. This does not merely reflect the fact that there are more households now than then, which would tend to lower the ratio even if the total number of cards stayed the same. In 1987, 2.856 billion holiday greeting cards were received vs. 2.117 billion in 2007 -- a decrease in sheer volume of 736 million cards.

HT Marginal Revolution.

Posted by Jay Hancock at 11:34 AM | Permalink | Comments (8)
Categories: Media
        

PG&E, California's largest electricity utility, has been installing computerized "smart" meters, which are critical for cutting energy use and bringing the grid into the 21st century. But it stopped installing them in Bakersfield after customers complained they were delivering incorrect readings, reports Bloomberg.

Martha Johnson, pastor of a church in Bakersfield, said her utility bill almost doubled from a year earlier to $874 in July after her new meter was installed. “That caught my eye because I’ve never had a bill that high,” said Johnson, 64.

San Francisco-based PG&E, which faces a lawsuit from a Bakersfield customer who’s seeking class-action status, says its meters are accurate and hot weather and increased rates led to higher bills than consumers expected. The state Utilities Commission ordered an independent study of billing accuracy.

Baltimore Gas & Electric has a pending proposal to install smart meters.

Posted by Jay Hancock at 10:54 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

Since late 2007, every month, the Baltimore branch of the Federal Reserve Bank of Richmond has been surveying Maryland companies about the economy, revenue, costs and investment. This month, companies' economic expectations for six months down the road hit their most optimistic levels since the survey was launched. That bodes well for hiring, profits and tax revenues.

 Business folks were asked: "What is your assessment of the level of general business activity six months from now?" for their company, for Maryland and for the nation. Readings for companies hit a survey high, and the reading for Maryland came close.

Granted, the survey is less than three years old. But the results, published Monday, are an encouraging sign of improvement. Says the survey: "Expectations for activity six months from now strengthened considerably. Survey respondents anticipate increases in business activity over the next six months with significantly higher sales, labor demand, prices and investment."

It's a decent survey. R. Andrew Bauer, economist for the Baltimore Fed office, sends out 152 queries each month and usually gets responses from between 75 and 100 companies, he says. Above are results for business people's outlooks for their companies six months out. It's a diffusion index. The percentage of companies that expect business activity to be lower six months from now is subtracted from the percentage that expect higher activity. Companies that expect no change have no effect. The higher the index, the more optimistic.

Posted by Jay Hancock at 6:24 AM | Permalink | Comments (1)
Categories: The Great Recession
        

As Larry Carson points out in today's story, the plunge in Maryland home values won't mean a similar decline in real estate taxes. Tax assessments sent out this week showed a 20 percent decline, in average, in home values. But because the tax system gradually phases in value increases, many houses were never taxed at the inflated levels they reached three years ago.

My Howard County house is a good example. According to Zillow.com, it's worth 19 percent less than it was in 2006. But last year the assessed value of the house was only $7,000 more than what Zillow says it's worth now. So maybe my taxes will go down a little, but not 19 percent.

There is a revenue impact for Howard County and other local governments. But it takes the form of revenue foregone in future years, not big, immediate revenue decreases. A few years ago counties were counting on property tax revenue heading up eventually to catch up with what they thought were permanently high values.

UPDATE: Couple good points. Jamie Smith Hopkins, who blogs here on the new assessments, notes that people who bought homes in recent years could see a tax decrease. The homestead credit that keeps tax increases from fully keeping up with home values applies only if the house didn't change ownership in the previous tax year. In other words, the credits are highest for people who have been in houses a long time. If you bought recently you may well see a tax decrease this year.

And, as commenter Garth points out, the homestead credit does not apply to rental properties. So landlords should also see decent tax decreases.

Posted by Jay Hancock at 8:06 AM | Permalink | Comments (8)
Categories: Taxes
        

One reason I like Baltimore is guys like A. Robert Kaufman, who died Friday. I disagreed with the lifelong socialist on most things, although not his deprecation of the war on drugs. I would argue with him when he called to chide me for columns he deemed too capitalist (which was just about all of them!)

But the presence of fringe voices on the left is the sign of a healthy, tolerant community. They can convey an idealistic sense of how things should be that we should hold in our hearts, even if the means they advocate are wholly impractical. Like many extreme liberals, Bob, from what I could tell, possessed little understanding of economic incentives, of socialism's fatal flaw of bad economic information or indeed of how capitalism, and not anything done by government, brought humans out of the squalor of the 17th century and into modernity.

But his motives were pure, and he never wavered. The cliche has it that a liberal is just a latent conservative who's never been mugged. But after Bob got hit in the head with a brick by a would-be robber, not only was he as lefty as ever; he used the occassion to decry the war on drugs:

The attacker "was so desperate for a fix that he resorted to doing this," Kaufman told the Sun at the guy's sentencing. "Both he and I are victims of the drug trade. If he had been able to go to a clinic and get what he needed, we both wouldn't be here. Now he has to go to prison. ... I wish him the best of luck while he is there."

Here's Kaufman's last letter to the Sun, published in early 2008:

The Sun's editorial "Ending homelessness" (Jan. 17) is inexcusably misleading.

It points out that there are 3,000 homeless people in Baltimore and that the jewel of the mayor's plan is that "within the decade, 500 units would be rented to individuals or families who have been homeless for a long time or who have multiple problems."

At that rate, it would take 60 years to house Baltimore's 3,000 homeless people. Most of them would be dead by then.

Worse still, those "500 units" within 10 years won't even be new apartments or houses. Presumably, they will merely be transferred from 500 other low-income subsidized housing residents who are almost as needy, and who, as a result, might well become homeless themselves.

What would be gained?

In the meantime, the impending economic collapse of capitalism will certainly increase homelessness by hundreds or thousands.

To herald such puny promises as an "ambitious" plan is to mightily deceive the public.

A. Robert Kaufman

Baltimore

Posted by Jay Hancock at 1:06 PM | Permalink | Comments (4)
        

The Indoor Tanning Association has gotten on the ball, urging tanning customers and tanning parlor owners to contact Congress. The canned letter they want people to send says that "the tax will ultimately be paid by the consumer and working Americans, working women and college students." Yeah, for an unnecessary and even harmful product.

Predictably, the tanning industry is portraying the tax as an attack on small business and women. "The tax unfairly targets female consumers, who make up more than two-thirds of tanning clients," says a trade organization called Smart Tan. Susan B. Anthony and Lucretia Mott must be tumbling in their graves over the Senate's outrageous attack on their gender. Elizabeth Cady Stanton would never think of missing her weekly session of basking under the UV lights and frying her squamous cell DNA.

Smart Tan also issues a wholly suspect "estimate" on potential job loss:

Smart Tan estimates as many as 1000 U.S. salons could close as a result of the tax in 2010 resulting in more than 9000 lost jobs nationwide.

Posted by Jay Hancock at 11:02 AM | Permalink | Comments (9)
Categories: Taxes
        

For those who keep Christmas, have a wonderful holiday. Everybody have a great break. Posting will be light/nonexistent till next week.

Posted by Jay Hancock at 12:51 PM | Permalink | Comments (0)
        

Very nice piece from Paul West this morning on two Maryland doctors on opposite sides of the health-care debate.

Dr. Zaneb Beams is doing everything she can to get Congress to approve health care legislation. Dr. F. Michael Gloth III is trying just as hard to kill it...

Still, Beams said, she cringed when a close friend from college phoned and said, " 'Thank you for all your lobbying on behalf of health care reform.' And I said, 'I'm not a lobbyist!' "...

Gloth said the legislation being debated in Washington would mean more bureaucracy, higher costs and greater inefficiency - and would make matters "much worse" for doctors and patients.

"You don't want to misconstrue my negativity toward this bill as saying that nothing is better than doing something," he said in an interview at a Manor Care nursing home in Catonsville. "But it can't just be change for change's sake. It has to be improvement."

Posted by Jay Hancock at 9:00 AM | Permalink | Comments (1)
Categories: Health Care
        

Today's column is about how next year Maryland may finally see a decent number of companies offering electricity packages as alternatives to the standard offerings from BGE, Pepco and so forth. Gov. O'Malley seems to have softened in his view of retail electricity competition, and he's not seeking a re-regulation bill that might quash it. The Public Service Commission may finally move on some long-overdue measures that would make it easier for competitive electricity suppliers to make offers to Maryland households the way they've been selling to offices and other businesses.

As mentioned, there have been a couple decent offers already out there. BGE's price for raw electricity between now and May 31 is 11.527 cents per kilowatt hour. You pay another 2.5 cents or so for BGE to deliver the juice over its wires, but that's not counted when you're comparison shopping. You pay BGE's delivery charge no matter who your supplier is.

Recently Dominion Retail has been offering a good deal: 10.37 cents through 2010 vs. the standard BGE price of 11.527 cents. That'd save houses $10 a month or more. But I can't get Dominion's Web page to confirm that price this morning.

Washington Gas Energy services has now lowered its price and is making a similar offer to Dominion's: 10.4 cents. And you can lock in for up to three years. It's hard to tell where electricity prices will go between now and 2012, but if the economy revives the WGES offer could be a good deal.

I'm locked in at 10.8 cents with WGES until April 2012. As always, you need to read the fine print. There are high early-termination fees, so keep that in mind. It's important to note that switching to WGES, Dominion or anybody else will NOT deprive BGE households of the $100 credit that O'Malley wrung out of BGE parent Constellation Energy. You get the credit no matter who your electricity supplier is.

Posted by Jay Hancock at 8:42 AM | Permalink | Comments (9)
Categories: BGE/electricity
        

So the Anne Arundel County Council finally approved a huge slots parlor (can it be a parlor when it's the size of a Super Wal-Mart?) for Arundel Mills mall, reports Nicole Fuller. Substantial slots money promises to start flowing into the state treasury, but it won't come in time to save policymakers from difficult budget decisions next year. And even when the slots faucet is full open, state budget headaches will remain.

Slots opponents vow to seek and win a county referendum on slots at Arundel Mills. It's a long shot. They have to get 19,000 signatures within 45 days to get the measure on next fall's ballot, reports Fuller. There are about 320,000 registered voters in the county, so slots opponents have to get signatures from more than one in every 20 Arundel voters. It's hard to imagine that many people care. I can't immediately find a tally of how Arundel voted on the 2008 statewide referendum authorizing slots, but as a state Maryland overwhelmingly favored slots.

UPDATE: Pulled from comments. Kent (thanks!) says the AA slots vote was:

149,604 for slots; 103,814 against. A 59-41% split in AA Co. alone, just about the same as the state.

Slots interests will aggressively challenge every petition signature they can, and then some. If nothing else the costs facing Arundel Mills slots opponents are daunting.

Even if opponents get an Arundel Mills slots referendum on the ballot next November, winning it will also be hard. Overall election turnout should decent, given that there's a governor's race and votes for U.S. House seats and one of Maryland's U.S. senate seats. That would would dilute the hard core of anti-slots voters with a larger wave of people who are indifferent.

Posted by Jay Hancock at 8:49 AM | Permalink | Comments (20)
Categories: Slots
        

Expensive gas substantially increases the price of fuel-efficient used cars, as people become increasingly willing to pay more for a vehicle now to save on fuel costs later. This is what economic theory predicts. For every $1-per-gallon increase in the cost of gas, the price for the most-efficient 25 percent of used cars goes up $2839, on average, finds a new paper at the National Bureau of Economic Research.

But the pattern is far less striking for new cars. Demand for fuel-sipping cars caused by a $1 gas increase drives up the price of the 25 percent most fuel-efficient new cars by only 3 percent. The difference, the authors find, is that the supply of fuel-efficient new cars is much more elastic than the supply of efficient used cars. When gas prices soar manufacturers crank up the production of efficient vehicles. But the supply of used efficient cars, dependent on previous production patterns, is more or less fixed.

Posted by Jay Hancock at 10:18 AM | Permalink | Comments (1)
Categories: Energy
        

Next time you're in a tedious office meeting, try drawing designs or goofy faces on your notebook as your boss drones on. If the boss objects, just tell him/her that a British psychology professor says doodling improves concentration and memory. When what you're listening to is stultifying, she says, doodling gives your brain something to do. Otherwise you might completely mentally check out. From the Guardian:

"A simple task like doodling may be sufficient to stop daydreaming without affecting performance on the main task," she said. "In everyday life, doodling may be something we do because it helps to keep us on track with a boring task, rather than being an unnecessary distraction that we should try to resist doing."

Posted by Jay Hancock at 8:34 AM | Permalink | Comments (1)
        

I'm kind of sorry the Senate health care bill got rid of the "bo-tax" on plastic surgery. Would have been decent way to raise revenue on something nobody except plastic surgeons and Joan Rivers would call a necessity. But the Senate bill now has a 10 percent excise tax on indoor tanning, which seems to have caught the Indoor Tanning Association by surprise.

The ITA's home page has a righteous blast against wise proposals in Baltimore County and Howard County to restrict teen access to tanning parlors. The measures are "an unnecessary intrusion of government in their daily lives" and (channeling Thomas Jefferson here) erode "the freedom of individuals to acquire a suntan." Nothing on the ITA site about the anti-tanning tyranny of the Senate health bill.

The tanning tax is a sensible tax of the sort advocated by A.C. Pigou. It raises revenue and also discourages activity which is harmful and costly to society.

Posted by Jay Hancock at 9:06 PM | Permalink | Comments (2)
Categories: Health Care
        

Stan Collender, a self-described deficit hawk, says that a terrible recession is a time to be a little less hawkish.

From my perspective, rather than just being against everything all the time that increases the deficit, deficit hawks will have a much bigger impact and be far more effective if they do the following:

1. Advocate aggressively and forcefully for reducing the deficit. Pay-as-you-go rules for new proposals are important, but existing programs already in the baseline shouldn’t get a free pass.
2. But understand that there are times, like when the economy is in the tank, that reducing the deficit or running a surplus is the wrong fiscal policy.
3. Be the one that helps define when a deficit is appropriate. One of the most important contributions hawks can make will be to communicate this so that it becomes the common wisdom. Their credibility will be enhanced in the process.
4. Don’t allow the deficit to be a partisan issue. Both political parties frequently use the deficit as an excuse whenever they oppose something but don’t want to state the real reason for the opposition. That makes the deficit into more of a political football and less of a serious issue. Members of Congress, candidates, party officials, think tanks, etc. all need to know that they can’t claim to be a deficit reducer today when they advocated unwarranted deficit increases yesterday.
5. Advocate as forcefully for debt reduction as deficit reduction when it makes sense economically.

To which I would add:
6. Don't reflexively rule out some tax increases. We aren't going to do all we need to cut the federal budget deficit through growth and spending cuts alone. Carefully considered, moderate tax increases -- maybe some sort of national consumption tax -- are probably part of the solution if we want to do right by our descendents.

Posted by Jay Hancock at 5:50 PM | Permalink | Comments (4)
Categories: Slo-mo fiscal train crash
        

Today's column reprises a piece I wrote a year ago, right after the authorities officially proclaimed a recession, about how Maryland's economy is doing and where it's going. I called back the folks I talked to in December 2008. It's slow, but at least they're seeing signs that we're at or near the bottom.

Even so, Maryland merchants expect their first holiday-sales increase this year since 2006. Some companies are thinking about hiring. Stimulus money and other federal spending have kept Maryland better off than most states.

"We think the worst is over," said Tom Saquella, president of the Maryland Retailers Association. "It's got a long way to go. Last year, our members saw the holiday season as half-empty. This year they see it as half-full."

Here's WBAL's Bill Vanko and me yacking about the column on the radio.

Posted by Jay Hancock at 12:14 PM | Permalink | Comments (1)
Categories: The Great Recession
        

Here's a landmark in modernity. Centuries after Italian bankers started honoring paper drafts issued by faraway merchants, Britain's bank payment overseers have voted to phase out paper checks by 2018, reports Reuters.

"There are many more efficient ways of making payments than by paper in the 21st century, and the time is ripe for the economy as a whole to reap the benefits of its replacement," Paul Smee, the council chief executive, said in a statement.

Of course the use of checks in the United States is declining, too. It's a huge challenge for check-printer Harland-Clarke, which has a plant in Glen Burnie. Harland and Clarke used to be competitors but merged as the demand for checks fell. In the Reuters story, advocates for the elderly complained about abolishing checks, which is a legitimate concern. Many old folks as well as lower-income families don't use ATMs or debit or credit cards.

Harland-Clarke says checks are alive and bouncing:

According to popular lore, Mark Twain once called the reports of his death greatly exaggerated. The same might have been said about radio, back when TV made its appearance. Or about snail mail, when email became inescapable. But radio and the U.S. Postal Service are still very much alive, despite the invention of new electronic ways to communicate. It is no different for the good old-fashioned paper checking account, as new electronic payment options enter the scene. While the use of electronic payments has increased in recent years, the truth is that checks are far from obsolete.

Posted by Jay Hancock at 6:44 AM | Permalink | Comments (11)
Categories: Finance
        

State policymakers tell Laura Smitherman in today's Sun that, despite new tax-collection disappointments, the Maryland economy is showing signs of bottoming out. Comptroller Peter Franchot's initial reaction to the latest revenue estimates "is one of relief." House Speaker Mike Bush Busch is "cautiously optimistic."

I'm hearing this from the Maryland business community, too. I'm working on a column for Friday's paper on the economic outlook for 2010, and so far I'm also hearing cautious optimism. Last night I talked to Tom Saquella, head of the Maryland Retail Merchants Retailers Association, who said he expects the first increase in Maryland holiday sales this year since 2006. Granted, it would be an increase from depressed levels and wouldn't get sales back to levels from a few years ago.

Even so, the 1.5 percent increase or so he's predicting would be better than the plunge of 2008. Since it increased its sales tax to 6 percent, Maryland's treasury is even more dependent on retail activity than it was before. Stabilization in retail helps explain the stabilization in tax collections the revenue authorities think they're seeing. Let us know in the comment section about how the economy looks from your viewpoint.

Posted by Jay Hancock at 8:39 AM | Permalink | Comments (3)
Categories: The Great Recession
        

So the Board of Public Works approved the deal to lease Seagirt, Baltimore's main public terminal, to Ports America and Highstar Capital for 50 years. One additional problem with the deal is, it'll be hard to know in the future whether it was a good pact or not. Much of Seagirt's financial data now becomes private, and it'll be impossible to see how much money Highstar or whoever owns Ports America is making.

The deal isn't done yet. They need to get financing and so forth. But the BPW approval was the last hurdle Highstar faced from the state. So the pact was basically announced and rubber-stamped within a month. The General Assembly gave its blessing in a letter yesterday. "The deal that the State has secured for Seagirt Marine Terminal will be of tremendous benefit to the State," top legislative officials wrote to MDOT yesteday. Not, I bet, as tremendous as the benefit to Highstar.

Posted by Jay Hancock at 2:43 PM | Permalink | Comments (6)
        

Time's person of the year is Ben Bernanke. It doesn't mean much, except that a few editors figured sitting in a room decided they could try to steer history and sell magazines by putting him on the cover. But already the blogosphere is unhappy with another example of kowtowing to power by mainstream media!

And yes, in response to the Time announcement, Godwin's Law violations are already being committed across the Web.

Posted by Jay Hancock at 11:32 AM | Permalink | Comments (2)
Categories: Media
        

A couple other quick thoughts on the Seagirt lease, the subject of today's column.

The column notes that there are no guarantees if Ports America doesn't produce the promised 5,700 jobs. The state and its consultants will argue that corporate projects never come with job guarantees. Not true. The economic development deals crafted by the Department of Business and Economic Development come with "clawback" clauses that give the state recourse if a business getting subsidies doesn't hire the specified number of people.

Also: The state is making much of the "multiple" of present Seagirt profits being paid by Ports America. Over 50 years this is virtually meaningless. The first thing they teach you in business school is that the worth of any asset is the discounted present value of the future cash flows, not what something is earning now. I have seen no analysis that suggests Ports America is paying a fair price based on what it will earn from the port of Baltimore over half a century.

Posted by Jay Hancock at 8:26 AM | Permalink | Comments (2)
Categories: Government & Business
        

Today's column is about Maryland's imminent deal to lease Baltimore's Seagirt container terminal for 50 years to a company owned by private equity fund. A 50-year lease is little different from an outright sale.

From the state that brought you electricity deregulation -- we know how that worked! -- comes a new plan to surrender crucial public assets to a private corporation. Today the Maryland Board of Public Works votes on whether to lease Baltimore's premier port terminal to Ports America for 50 years.

Private companies make profits in these "public-private partnerships" by minimizing the money they put in over time and maximizing the revenues. The longer the lease -- 50 years is a long, long time -- the bigger the possibilities. That's why it's important to correctly calculate the "present value" of the dollars everybody is committing and to make sure the rents Maryland collects keep up with inflation, which over half a century can do terrible things.

First, the inflation. Ports America's lease payments will increase with the consumer price index each year -- but only up to 3.5 percent. As the column notes, that's substantially less than inflation over the past 50 years (4.1 percent) and very probably less than what inflation will be in the next half century. The only way the United States is going to get its $12 trillion in debt under control is to depreciate the dollar through inflation and pay back old, expensive borrowings with new, cheaper dollars.

Ports America would start paying Maryland annual rent of $3.2 million, and the inflation kicker starts at year 5. Say the state got the full, 3.5 percent raise every year. By 2060 the basic annual rent paid by whoever owns the lease then would be $15 million. But if inflation were much more, $15 million wouldn't be very impressive. Say average inflation were 6 percent. Then, thanks to 50 years of compounding, the real value of $3.2 million in 2060 would be $59 million. But Ports America would be making only $15 million in lease payments -- much less in real dollars than it pays now. So in nominal dollars Ports America's rent would go up only fivefold while what it could charge shippers could go up 18-fold. PA's profit-sharing deal with Maryland, in which it would pay the state $15 for every container over 500,000 a year, is also subject to the 3.5-percent inflation cap.

So when Ports America talks about future dollars it will invest in Seagirt, it's important to correctly figure what that money is worth. Total dollars invested by Ports America over the term of the lease, including rents, maintenance and capital expense, could be as much as $1.8 billion. But since much of it will be spent years hence, it's actually worth a lot less in today's dollars. How much less? In its analysis the Maryland Port Administration has "discounted" Ports America's various contributions by between 6 percent and 9 percent, taking into account the time value of money, risk and so forth. MPA comes up with a present value for the $1.8 billion of $466 million.

But even this may exaggerate the value of Ports America's contribution. A better discount rate on public-private partnerships, given the risk, length of leases and other factors, is 10 percent or 12 percent, says James Koch, the economist and former president of Old Dominion University who is advising the Virginia General Assembly on its own ports deal. After applying that kind of factor, the promised money from Ports America looks even less impressive.

I understand why public-private partnerships are attractive to governors. They get big cash up front so they don't have to raise taxes or cut programs or sell as many bonds. But I'm afraid that in the fullness of time these deals are much better for the private partner than the public partner.

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (3)
Categories: Government & Business
        

So I don't look at my wireless bills. They get paid automatically from a credit card, and I trust AT&T. (The former Cingular, which acquired what little was left of the old Ma Bell and adopted its name because it's a trusted brand.) But somebody ripped off my wife's credit-card number, and we had to sort out the fraudulent charges from the real ones, and we looked at the AT&T charges and they looked too high. So I went into the bills and it turns out AT&T has been charging me between $10 and $30 a month for horoscope reports, fun facts and other text subscriptions that I didn't order and never heard of. Total charges: $160. (Also: I never got the horoscope readings!)

These were wholly bogus, and I know my kids didn't order them because they were on my line. It's incredible that AT&T even does business with these people, let alone helps them rip customers off on its own billing system. Presumably AT&T shares in the horoscope revenue. So I contacted the company. They offered to refund half the money and sent me a "tutorial" of helpful hints on how to text and order mobile content! Only when I threatened to contact the Maryland attorney general did they relent and agree to refund all the dough.

Below are the emails I had with the company. NB: I never disclose I'm a journalist when I contact companies for redress. It's unethical to use your status with the media to even imply that you want special treatment. But since they've agreed to give back the money, I thought the experience would be instructive. Check your cell bills!

My email complaining to AT&T:

Since April I have been charged a total of $159.84 for "monthly subscriptions" in the "Mobile Purchases & Downloads" category. I never ordered these subscriptions, let alone received them. I have no idea who these people are. Please rebate a credit of $159.84 to my next bill. And please stop the charges from recurring. Thank you.

AT&T's first reply:

Dear Mr. Hancock,

Thank you for taking the time to e-mail AT&T regarding you would like to receive a refund for the mobile purchases from the April bill until the current bill. I apologize for the frustration this has caused. My name is Phylicia XXXXXX, and I am happy to help you with your inquiry.

We are only able to credit the last 3 months of Mobile Purchases. I have requested a refunded for mobile number 410-XXX-XXXX. The total amount refunded will be $79.92. You will receive this refund within 24 hours.

For future reference if a ringtone, graphic, or game or other content is not received, or does not meet your expectations, you have the option to cancel the subscription and/or challenge the charge. You can view, cancel, or dispute charges through Direct Bill at www.att.com/db

My 2nd email to AT&T:

Dear Phylicia: Thank you for handling my case. Thank you for the information, and thank you also for the offer of the $79.92 refund. But with all due respect, this is inadequate. The full amount of bogus charges on my wireless bill since April is $159.84. I had nothing to do with incurring these charges. I never signed up for these services, nor did anybody in my family. I have never heard of these services. They are AT&T's responsibility. If your billing department is going to allow wholly fraudulent items to go on my bill and to debit my card balance accordingly, AT&T has to deal with it. Please refund the full amount of $159.84 or I will contact the Maryland attorney general. Thank you.

AT&T's 2nd reply:

Thank you for taking the time to e-mail AT&T. I am very sorry to hear that wireless number 410-XXX-XXXX has been charged for subscriptions that you did not order and you are requesting a full credit of $159.84. My name is Debbie XXXXXX, and I am happy to help you with your inquiry.

After review of your account, I show that you were given a credit for the last four months of Mobile Subscriptions and I have issued an additional credit of $79.92 making the total credit $159.84.

In the future I would recommend your monitor your monthly bills to make sure you do not show any unauthorized charges and if you do you can dispute them that same month.

To stop mobile purchases I would recommend you activate purchase block on your phones. I have sent you a separate email on how to activate purchase blocker.

In the future I would recommend AT&T not allow its business partners to rip off its customers.

Posted by Jay Hancock at 9:02 AM | Permalink | Comments (17)
        

I missed this a few weeks ago. Michael Mandel, chief economist for Business Week and the only Ph.D economist I know of who was a full-time news reporter (NYT's Krugman does opinion, not reporting), has left the magazine. Bloomberg bought it and presumably wants to bring in lots of its own folks. But Mandel's departure deprives the magazine of a great authority who could also write lucidly (they don't always go together) on innovation, technology, productivity, statistical reporting and other important topics. Here is the new address for his blog: http://innovationandgrowth.wordpress.com./

Posted by Jay Hancock at 3:10 PM | Permalink | Comments (0)
Categories: Media
        

This is either good news: People are buying RVs because the economy is picking up. Or it's bad news: People are buying RVs because they're living in them.

Airstream, a leading recreational vehicle manufacturer in North America, announced today that it has increased its production by 25% since October in order to meet growing market demand. Furthermore, the company is scheduled to expand production by another 25% in January.

In addition to doubling its net output in five months, Airstream’s production backlog has also more than tripled since last year. As a result, Airstream will expand its production workforce by 35% to support the boost in production and demand.

Posted by Jay Hancock at 1:45 PM | Permalink | Comments (1)
Categories: The Great Recession
        

A retired state worker takes exception to my pointing out that Maryland's spending and liabilities for health-care coverage for retired employees are growing at an unsustainable rate. To cover future retiree medical costs Maryland needs to immediately start appropriating $600 million a year -- as much as will be raised by slot machines if they ever arrive. Liabilities have hit $16 billion and are growing by a billion dollars or so every two years. As in so many other areas of government, we're spending way over our budget. The retiree wants to keep these benefits because they are "hard earned." I'm sure state employees worked hard for these benefits. But the benefits are costing far beyond what either the state or the employees have contributed. What should be done? Here's the note from the retiree:

Here you go again. First you slam AARP, now you're hitting on State Retirees. I am one of those people. When I retired in 2001 from State Service with 36 years, I was promised, on my last day of work, the benefits I now receive for a life without frills. Pick on the real culprits of this problem....drug and health companies with their creamy salaries and profits. The Blue Ribbon Committee you mentioned are waiting for your Republican Congress to let a health bill pass before they act. That seems reasonable. You should know that the delegates that I've communicated with feel that the solution should NOT be on the backs of retired folks, not even current workers, but on new-hires in the future. At least that's what Delegate Lafferty told me in his phone town-meeting a couple weeks ago. Leave us alone. Do you have parents or grandparents on a pension and you want them to lose any part of their hard-earned benefits !??! No way...Shame on you, Jay.

He has a long memory. I slammed AARP three years ago, when I turned 50 and they started stalking me with junk mail.

Posted by Jay Hancock at 11:10 AM | Permalink | Comments (2)
Categories: Health Care
        

This month's floating price for Baltimore Gas & Electric natural gas rose to 65 cents per therm. (Not counting delivery by BGE.) That's the highest it has been since March, when it was 85 cents, on a rapid descent from $1.05 in December 2008 to 53 cents in May. The November BGE gas price had been 63 cents. While BGE gas has bumped up since May, it's still way below last year's levels and below the competing, fixed price offers from WGES and others for this winter.

Washington Gas Energy Services has been offering to lock BGE households into a 73-cent natural gas price for a year and 83 cents (a couple months ago it was 85 cents) for two years. On Oct. 6 I wrote: "I'm pretty sure the one-year [WGES] deal will turn out to be more expensive than BGE's default program. The two-year package I'm not so sure about. If the economy recovers in a healthy way, natural gas prices could easily be north of 85 cents for the winter of 2010-2011."

That still sounds about right. Spot prices for wholesale natural gas are bumping around in the 50-cent-per-therm range at the Louisiana shipping hub. (You have to add about a dime to pipe it to Maryland.) But futures prices for the winter of 2010/2011are trading around 80 cents, which would seem to assume an economic pickup. I'm still sticking with BGE's standard, floating, month-to-month price.

Posted by Jay Hancock at 6:35 AM | Permalink | Comments (3)
Categories: BGE/electricity
        

The Christmas tree guys at Costco are allowed/encouraged to help customers put the trees on top of the car, cut the twine and help throw the twine over the tree. But they are forbidden to tie the knots.

Posted by Jay Hancock at 2:50 PM | Permalink | Comments (1)
        

Maryland schools superintendent Nancy Grasmick is making what The Sun's Liz Bowie calls "bold proposals" to improve teacher quality. I suppose by Maryland standards they are bold. Grasmick wants to make teachers prove themselves for more than as little as two years before they get tenure and protections from getting fired for incompetence. She wants three years or four years. Some states require up to seven years, Bowie reports.

Grasmick also wants to link teacher evaluations to student test scores and get the ability to increase pay for those who can teach tough subjects such as math or Chinese. Imagine -- evaluating teachers based on results! Paying more to employees who have mastered difficult subjects that students need to learn in the 21st century economy! It's telling that Maryland policymakers had to use the prospect of getting federal stimulus money as an excuse to propose these changes.

But, I mean, really. Even if the time to get tenure is extended from two years to four years, it'll still be hard to dismiss teachers who slack off later in their careers. The reforms would go another step in elevating the idol of standardized test scores. And it's ridiculous that the school system should even have to negotiate with the union to pay more to physics and calculus teachers. For most people quantitative skills are harder to learn and harder to teach. Bilingual teachers are the exception rather than the rule. Schools should be free to pay science, math and language teachers what they're worth.

UPDATE: Teachers are getting quite defensive in the comments section, which puzzles me. I'm advocating excellence and accountability for teaching. In what respect does that contain an "antagonistic undercurrent," as one teacher commented? We should demand excellence and accountability in every profession, including journalism. I revere teachers. In another life I would have become a teacher. I have been volunteering as a tutor in an inner-city Baltimore elementary school for more than a decade, and I can't believe the toil and dedication of the professionals there. Teaching is one of society's most important professions. That's why we should hire the very best people we can, hold them to high standards, pay them what they're worth when they meet expectations and hold them accountable when they don't.

Pointing out that some teachers protected by tenure aren't delivering results our kids deserve is not the same as deprecating all teachers.

Posted by Jay Hancock at 9:12 AM | Permalink | Comments (27)
Categories: Education
        

Deferred costs are a key theme of American management in the past 50 years. CEOs in business as well as government have been tempted and tempted to make financial commitments that do not come out of current income. They almost always succumbed. Bosses of General Motors in the 1960s and 1970s helped set the stage for this year's bankruptcy by giving unions generous pension and retirement health benefits. It seemed like a great deal for everybody. Workers got promises of gold-plated retirement benefits, and the cost wasn't deducted from quarterly earnings. So bosses still got their bonuses tied to profits and the shareholders still had the illusion of a prosperous enterprise.

I don't need to belabor how this dynamic is playing out with the federal government. Because states need to balance their operating budgets, they have less leeway to stick future taxpayers with present costs. But of course politicians will figure out ways to do it. Today's column is about health benefits for retired Maryland state workers. Hardly anybody in the private sector gets this kind of deal these days. From an accountant's point of view, promising people to pay millions in future benefits as a condition of present employment is a present liability, but states haven't been recording these liabilities on their books. Even worse, they haven't been putting money aside to pay these future costs. If it keeps up, that will leave future taxpayers with a huge balloon payment when the bill comes due. From today's column:

No wonder Gov. Martin O'Malley and the legislature are ignoring the $16.3 billion in liabilities Maryland has racked up to finance generous health plans for retired state employees.

By one measure, Maryland's burden for future retiree medical costs is the heaviest of any state in the country. A new report shows that the program's unfunded expense grew by $1.3 billion just in the past two years.

Acknowledging the bill would require doing something. We certainly can't have that.

Read the whole thing here.

Posted by Jay Hancock at 8:15 AM | Permalink | Comments (3)
Categories: Politics
        

Paul West reports that earmark queen Barbara Mikulski and others of the Maryland congressional delegation have brought home the pork again. The new batch of spending is $100 million. That, West reports, "is on top of nearly $700 million in spending for Maryland projects that was requested by President Barack Obama in his 2010 budget."

Some of these projects are probably justified. Many assuredly are not. In any case, they mean more federal dollars showered on a state that is well accustomed to them but always wants more. Maryland has been basting in federal sauce ever since the Bush administration started to blow money in the name of homeland security after the September 2001 terrorist attacks. Total federal spending and obligations in Maryland in 2008 was a record of $77.9 billion, according to the Consolidated Federal Funds Report. That's up 60 percent in nominal dollars from the 2001 level. In a state economy of about $300 billion, $77.9 billion from Uncle Fed is real dough.

Much of this comes from taxes paid by New Jersey, Connecticut and other hapless places with high incomes that don't happen to be right next to D.C. Maryland sucked in $67 billion in federal spending in 2005 but paid only $49 billion in federal taxes, according to the Tax Foundation. New Jersey, on the other hand, paid out $86 billion in federal taxes that year but got back only $59 billion in federal spending. Thanks New Jersey!

Posted by Jay Hancock at 6:23 AM | Permalink | Comments (2)
Categories: Government & Business
        

Today's column is about the "political business cycle," the attempts by incumbent politicians to goose the economy so times are (relatively) good when they're trying to get re-elected. Today's announcement by Treasury Secretary Tim Geithner is a prime, shameless example of what goes on. Geithner and Obama are renewing the TARP fund, the magical bailout fund that keeps getting reinvented for whatever purposes the administration wants to put it. First it was supposed to buy toxic mortgage bonds. Then it was used to buy bank preferred stock. Now they want to use it for small business loans.

In any event, Geithner is extending TARP beyond its planned roll-up date of the end of this year. That's no surprise, but check the new expiration date: Oct. 3, 2010. Just a month before the midterm elections.

Posted by Jay Hancock at 11:58 AM | Permalink | Comments (4)
Categories: Politics
        

What's the highest and best use of the domains baidu.eu, baidu.be etc.? Not being associated with the European Web-design firm named Baidu, it would seem. Since the other Baidu, based in China, has become the world's 2nd-biggest search engine, the search-Baidu identity has eclipsed other meanings. Euro Baidu has decided to dump its Baidu domains, trademarks etc. and sell the stuff to the highest bidder on eBay. It hopes to raise $1.7 million. Starting bid is $250,000. Presumably the Chinese Baidu would be interested, but who might bid against it? How about Google? From the press release:

Since announcing their intention to sell their domains and brand names, Baidu Europe (baidu.eu) has spoken with several parties, among which are a Brazilian-based Internet company, an American adult porn search engine and a Thai search engine called Buzz Technologies Inc. Interested parties can now make a bid on eBay during the next 10 days. The highest bidder on eBay will become the owner of 16 Baidu domain names (including baidu.eu, baidu.tv/tel and baidu.me) and a valid brand name Baidu in 27 European countries and the United States.

Posted by Jay Hancock at 11:09 AM | Permalink | Comments (0)
Categories: Intellectual Property
        

I'm biased to love the O'Malley administration's proposal to buy nearly a fourth of all the megawatts used by state agencies and universities from nearby wind- and solar-power producers. It's a bold move to stimulate the development of renewable energy in the region and burnish the state's high-tech cred by supporting next-generation generation, so to speak.

Buried in the news of this announcement is Constellation Energy's idea to build a 17-megawatt solar farm in Emmittsburg to sell juice to the state as part of the deal. That would be the 32nd biggest photovoltaic array in the world and the 3rd-biggest in the United States, according to today's rankings, although surely many other projects are being built that will compete for the top spots.

But the state has to come clean on what this will cost taxpayers. Maryland energy czar Malcolm Woolf wouldn't disclose it to The Sun's Tim Wheeler. "Terms of the deals remain confidential until the contracts are signed early next year," Wheeler paraphrased Woolf as saying. "Generally speaking, the prices agreed to are slightly higher than electricity costs today, he said..."

Sorry, that's far from acceptable. Revealing the terms after Maryland is legally obligated to honor them is not the way open government should work in a transaction of this size. Over the 20-year term of the deal the cost will be in the $1 billion neighborhood. The price of solar- and wind-generated electricity is typically a lot more than "slightly higher" than today's prices for coal and nuclear juice. As a public entity the state isn't eligible for renewable-energy tax breaks available to corporations and individuals. The deals may be worth doing even if the price is a lot more than slightly higher. But taxpayers need to see the numbers.

Posted by Jay Hancock at 6:37 AM | Permalink | Comments (17)
Categories: BGE/electricity
        

The defense of the behavior of Wall Street bankers leading up to last year's collapse is to say that they didn't see it coming. After all, the likes of Dick Fuld & Co. had billions tied up in stock and options at their companies, so why would it be in their interests to take undue risks? They lost more than anybody in the collapse, so at least the incentive structure was properly aligned. Some profs connected to Harvard Law School give the lie to this idea by analyzing the dough banking execs pulled out of their operations before the music stopped.

The execs got away with so much loot beforehand (including bonuses based on "profits" that proved illusory), the study shows, that they were well rewarded for ruining the shareholders. Even if those shareholders included themselves.

In 2000-07, the top five executives at Bear and Lehman pocketed cash bonuses exceeding $300m and $150m respectively (adjusted to 2009 dollars). Although the financial results on which bonus payments were based were sharply reversed in 2008, pay arrangements allowed executives to keep past bonuses.

Furthermore, executives regularly took large amounts of money off the table by unloading shares and options. Overall, in 2000-08 the top-five teams at Bear and Lehman cashed out close to $2bn in this way: about $1.1bn at Bear and $850m at Lehman. Indeed, the teams sold more shares during the years preceding the firms’ collapse than they held when the music stopped in 2008.

Altogether, equity sales and bonuses over that period provided the top five at the two banks with cash of about $1.4bn and $1bn respectively (an average of almost $250m each). These cash proceeds considerably exceed the value of the executives’ holdings at the beginning of 2000 (which we estimate to be in the order of a respective $800m and $600m).

Posted by Jay Hancock at 11:22 AM | Permalink | Comments (2)
Categories: Finance
        

Missed this story last week. Frederick Bouchat, the amateur artist who has been in a legal war with the Ravens for more than a decade over a team logo he drew, is still at it. Bouchat designed a "Flying B" image that a jury ruled the Ravens stole from him for their original logo. However, the jury didn't award him any damages, and the Ravens changed their logo. These days Bouchat is saying the Ravens' sale of old game footage violates his copyright because his design appears in the films. He wants a judge to block the sale of any Ravens materials that portray the Flying B.

To see Bouchat's logo, check out the Maryland Intellectual Property Blog. Of course under fair use I could reproduce it here, but Bouchat has also sued The Sun over display of his design, and I have other things to do than talk to 8 lawyers. Such is the chilling effect...

Posted by Jay Hancock at 6:16 AM | Permalink | Comments (2)
Categories: Intellectual Property
        

AP is reporting that, in exchange for dropping the public option from health-care legislation, liberal Senate Democrats are seeking an expansion of Medicare -- extending Medicare coverage to those as young as 55. (For most people Medicare eligibility starts at 65.) It'll be interesting to see how the Congressional Budget Office scores that. Of course it depends on what the premiums are for the under-65 enrollees, and what's covered. But there is a risk this will inflate the pricetag. Under the public option, the new folks covered under a taxpayer-sponsored plan would have been of a wide range of ages. Under this deal, they'll be concentrated in the late-middle-age/early geezer segment, and therefore subject to more illness and more medical expense.

The new deal would also reportedly have private, nonprofit plans selling insurance nationwide, something that should have been facilitated a long time ago. Now health insurance is chopped up pretty much according to state, which limits competition.

UPDATE: AP's latest story focuses more on the idea of national, private plans filling the "public option" role and downplays the idea of expanding Medicare to younger enrollees.

Posted by Jay Hancock at 9:35 PM | Permalink | Comments (4)
Categories: Health Care
        

Gov. O'Malley, trying to burnish his pro-business appearance, is holding a "Small Business Summit" today. There are various issues, but I promise you that the No. 1 topic for most small businesses is the increase in rates for unemployment insurance. Because rising unemployment has drained the fund, Maryland rates are supposed to pop by hundreds of dollars per employee in many cases on Jan. 1.

I'm sure O'Malley has gotten an earful. He's announcing several small-biz boosters today, including tax credits of up to $3,000 for hiring an unemployed worker and speeding up the process to get state-guaranteed loans. Question: Could businesses claim the new tax credit on top of the existing job-creation credit of up to $1,500 per worker? That credit was approved in the 1990s, the last time Maryland's economy was this sluggish. It was permanent; O'Malley's proposal would be temporary. And what if companies rehire people they laid off? Are they eligible?

In any event businesses are really going to want to know what the governor is doing about unemployment insurance. So far his office is very vague, saying it would "Introduce emergency legislation to address the rate increase for small businesses to the Unemployment Trust Fund."

Posted by Jay Hancock at 1:44 PM | Permalink | Comments (2)
Categories: Regulation
        

Good piece at Citibiz List by Doug Schmidt of Chessiecap on Stanley Works' buyout of Black & Decker. He's unhappy about the deal, especially about the millions being reaped by Black & Decker CEO Nolan Archibald as well as Stanley exects: The gist:

It is clearly legal, but it is one of the seedier sides of our markets that the SEC seems powerless to expose or control. Not only will Mr. Archibald receive a bonus worth scores of millions of dollars to make this deal work, the top two Stanley executives are also issuing themselves almost 1.8 million "merger equity grants." There is something for everybody in this deal as long as you work at the top.

As Schmidt points out, it's not just lower-level Black & Decker employees who are getting the shaft. Shareholders haven't done that well, either. Nevertheless,

In addition, Mr. Archibald has enriched himself enormously in his twenty years as CEO, becoming the largest individual Black & Decker shareholder with approximately 2.5 million shares or over 4% of the total ownership. He ranks as the 7th largest institutional shareholder behind funds such as Fidelity and AllianceBernstein. Even before the incentives and pay package provided in the transaction, Mr. Archibald's current stake is worth approximately $150 million. [Emphasis Schmidt's.]

UPDATE: That didn't take long. The time stamp on this post is 12:04. At 12:30 Black & Decker spokesman Roger Young was on the line, noting that Schmidt substantially overstated Archibald's pile by saying it's worth $150 million. Young is right. Archibald controls 2.5 million Black & Decker shares, but more than 2 million shares of this are in the form of options, with strike prices varying from $30 to $92. (An option gives you only the difference between the strike and the market prices.) Today BDK stock is about $62. So the options are worth a lot less than the $60 figure Schmidt used, and some are worthless. Still, they come to many millions. At the same time, it looks like Archibald owns BDK shares worth about $11 million. In any event you don't feel sorry for him.

Posted by Jay Hancock at 12:04 PM | Permalink | Comments (1)
Categories: Finance
        

Nuclear energy (from already-built and -depreciated reactors) is already cheaper than energy from fossil fuels. A tax on carbon -- directly or indirectly through a cap and trade scheme -- and nuclear energy gets even more competitive. That's behind today's statement by Constellation Energy CEO Mayo Shattuck favoring an agreement in Copenhagen to cut carbon dioxide emissions. From his statement:

There appears to be a global consensus that the world needs to cut its emissions in half by 2050, compared to today’s levels,” said Shattuck. “At Constellation Energy, we are particularly focused on the technological and industrial transformation that will be necessary to meet that objective. Nuclear energy currently provides about 14 percent of the globe’s commercial electricity and that number needs to increase substantially if we are to meet the 2050 long-term goal.

Posted by Jay Hancock at 10:35 AM | Permalink | Comments (3)
Categories: Energy
        

The New York Times' Nicholas Kristoff is on a carcinogen and endocrine disrupter binge. He's been writing lately about chemicals in food, water and storage containers that may be messing up our systems. I assume he's getting complaints from industry that he's oversimplifying things, but it's great that he's focusing attention on this stuff. Scientists have done a good job identifying the acutely toxic substances in our lives: tobacco smoke, lead, mercury etc. They're having a harder time identifying the subtly dangerous stuff.

Kristoff keeps harping on the bad molecules that may be leaching out of plastic food containers. His latest advice:

I asked these doctors what they do in their own homes to reduce risks. They said that they avoid microwaving food in plastic or putting plastics in the dishwasher, because heat may cause chemicals to leach out. And the symposium handed out a reminder card listing “safer plastics” as those marked (usually at the bottom of a container) 1, 2, 4 or 5.

It suggests that the “plastics to avoid” are those numbered 3, 6 and 7 (unless they are also marked “BPA-free”). Yes, the evidence is uncertain, but my weekend project is to go through containers in our house and toss out 3’s, 6’s and 7’s.

Posted by Jay Hancock at 8:47 AM | Permalink | Comments (3)
Categories: Health Care
        

The Great Recession may be technically over for the economists -- GDP is rising again, which means the decline in economic output that defines recessions has stopped, at least temporarily. But it won't feel like it's over to Americans until the country starts adding jobs again. That hasn't happened yet, but today's jobs report from the Labor Department shows the next best thing: We've stopped losing jobs, at least for one month.

Analysts had projected the November jobs report to show that the economy had shed employment by more than 100,000 jobs for the 22nd month in a row. They were wrong. Today's report shows that the economy lost only 11,000 jobs last month, which is statistically nothing. And previously announced job losses for October and September were substantially revised, for the better. October job loss was not 190,000, as announced a month ago, but 111,000. The economy lost 139,000 jobs in September, not 219,000 a previously announced.

The unemployment rate even dipped a little bit, from 10.2 percent in October to 10 percent.

Make no mistake: The economy is still terrible and will be bad for many months. We're not adding jobs yet. But today's report is the single best piece of economic news we've had for a long time. And it suggests that the policy responses by the Bush administration and the Obama administration -- big-bank rescues, unprecedented monetary stimulus, almost $800 billion in fiscal stimulus -- are working.

Posted by Jay Hancock at 9:03 AM | Permalink | Comments (4)
Categories: The Great Recession
        

Pulled from comments. Jeff Nelligan, a spokesman for Johns Hopkins Medicine, responded to my post (A poor excuse for high Baltimore medical costs) on the comparatively high cost of care at Johns Hopkins Hospital and the University of Maryland Medical Center, as calculated by the Dartmouth Atlas Project. The post referenced a Sunday article in the Sun about the subject and noted that the Mayo Clinic is considered a standard for delivering cost-effective care. I'll respond to Nelligan's comments in italics.

There is no doubt that the Mayo Clinic is a world-class medical center. And there is little doubt The Dartmouth Atlas is valuable in purely assessing Medicare hospital costs. But the Atlas — and the Mayo comparisons — haves limitations that cause us, as well as others, to question their results.

First, the Dartmouth Group began its study years ago focusing on geographic variations. Baltimore is vastly different from Rochester, Minn., home of the Mayo clinic. Our surrounding population also differs dramatically from Mayo’s in terms of income, education, disabilities, crime rates and employment status. For example, 35 percent of our patients are African-American vs. 2 percent for Mayo; 34 percent are below poverty level vs. 5 percent for Mayo; 29 percent are disabled vs. 10 percent for Mayo; 3 percent have a bachelor’s or higher degree vs. 35 percent for Mayo.

This is Jay. A valid point. Different populations present with varying health problems, some of which cost more to treat than others. As Nelligan notes below, Hopkins patients tend to be diagnosed with multiple chronic diseases more often than those at some other hospitals.

Another example is security. Unlike Mayo, we have to maintain a security force of over four hundred professionals to assure a safe campus for our patients, visitors and staff. The most

striking factor in terms of geographic variation, which is not accounted for in the Dartmouth model, is cost of living. The cost of living index (including costs for food, shelter, tax rates and transportation among others) for Baltimore is 121 compared to 98 for Rochester. This alone would explain 50 percent of the difference between our costs and Mayo in the Dartmouth data.

Not buying this. Johns Hopkins Hospital pulls in $1.7 billion in annual revenue. Whatever security costs exist -- $50 million? (I'm being generous) -- are almost immaterial. And using differences in regional consumer prices to explain variations in medical costs would get you thrown out of statistics class.

Second, Dartmouth has a very limited risk adjustment for differences in the underlying conditions. Our patients also tend to have more associated comorbidities, such as diabetes, hypertension, drug abuse, heart disease, etc., than those seen by many other hospitals. Much of this is attributable to the population difference described above. The Dartmouth model does not account for any of these factors, each of which can have a significant impact on health management strategies and their related costs. The Dartmouth authors suggest that you do not have to account for severity of illness among patients because “the study only focused on patients who died so we could be sure that patients were similarly ill across hospitals. By definition, the prognosis of all the patients in the cohort was identical — all were dead after the interval of observation. Therefore, variations cannot be explained by differences in the severity of individuals' illnesses.”

This is the point I was trying to make on the original post. All the patients were dead within two years, so how can you say yours were sicker?

We find this to be a problematic statement because it assumes that the experience of all patients in the cohort had similar experiences. This assumes that all end-of-life care is the same and the only thing that matters is how much it costs. It does not reflect care that appropriately extends life and/or improves the quality of life. If we provide more care to patients who thus have longer productive lives, this is not reflected in the data associated with Dartmouth.

By following this argument you might conclude that spending $1 billion on extending a terminally ill patient's life by a week is a worthwhile investment. To repeat: All the patients died within two years, so "longer" and "productive" are very relative terms. In an economy with scarce resources, the definition of "appropriately" in the phrase, "care that appropriately extends life," is something we need to talk about.

Third, Dartmouth indicates that more hospital days and more inpatient consults are "aggressive" care versus conservative care. One might argue that patients and their families prefer to be at a place that provides more physician services during their hospital stay — one that doesn’t push them out of the hospital too fast.

Of course this is what patients and families want. Since they're not doctors, they assume that more care is better care. Since Medicare is paying, they aren't worried whether more care is cost-effective. Since docs and hospitals get paid more for more care, more care is delivered. This is the whole problem.

Fourth, their premise that higher costs are not associated with higher quality is based on indicators that may not actually indicate higher quality. For example, indicators such as the percent of people who died in the hospital or in an ICU do not necessarily point to poor quality.

Yeah, some quality studies penalize hospitals in which inpatients die. But this study counted patients no matter where they died. In the data we're talking about, there's only one variable -- how much was spent in the last two years of life.

Finally, it must be understood that because of the all-payor system, unique to Maryland, private payors do not subsidize governmental payors in our state. The Medicare rate we receive in Maryland is higher than other states because our system requires that all payors pay the same rate for a given service at a given hospital. This prevents “cost-shifting” of Medicare and Medicaid due to low reimbursement rates to other hospital. Since the Dartmouth study looks only at Medicare patients, the costs for the Medicare patients in other states appear to be less, but all other patients — that is, all other patients not on Medicare — pay a higher amount than those in Maryland.

A good point, one that was noted in the article by Jamie Smith Hopkins and Kelly Brewington in their article.

We hope that readers can appreciate that a simple comparison between the costs associated with care at Johns Hopkins, the University of Maryland Medical enterprise, Mayo and at many other institutions, does not even begin to tell the whole story. There are many factors that explain these apparent differences, and when these factors are included in the calculations, the differences begin to melt away.

Posted by Jay Hancock at 6:30 AM | Permalink | Comments (12)
Categories: Health Care
        

Never heard of Michael Parker or his Virginia-based firm, TransCapital. But here's a Justice Department press release saying he pleaded guilty to a conspiracy charge relating to a fraudulent tax shelter that saved Kroger $64 million in federal taxes.

WASHINGTON – Michael Parker of Baltimore, who was the chief operating officer of TransCapital Corporation, a tax-advantaged investments company based in Northen Virginia, pleaded guilty today to one count of conspiracy to defraud the United States, the Justice Department and Internal Revenue Service (IRS) announced.

According to the plea agreement and statements made during the hearing before United States District Judge Sandra S. Beckwith in Cincinnati, Parker admitted to conspiring with Daryl Haynor, an accountant who was a tax partner at KPMG LLC, in its Tysons Corner, Va., office, and

Jon Flask, an attorney for TransCapital, who was a partner at a law firm in Vienna, Va., to defraud the IRS with regard to tax shelter transactions. Parker admitted that he was both a CPA and an attorney, but acted as the Chief Operating Officer of TransCaptial Corporation. In October 2009, Haynor and Flask were indicted for conspiracy to defraud the IRS and for corruptly endeavoring to obstruct and impede the due administration of the internal revenue laws.

According to the plea agreement and statements made during the hearing, from 1998 through 2006, Parker, Haynor and Flask marketed and implemented a tax shelter to KPMG clients called the Sale Leaseback of Tenant Improvements Strategy (SLOTS), which enabled various U.S. corporations to claim tax deductions totaling more than $240 million on corporate income tax returns filed with the IRS. During 2002 through 2004, the IRS audited three U.S. corporations that had claimed losses generated by SLOTS transactions, including The Kroger Company. Parker identified Kroger as the Fortune 500 corporation which did the largest SLOTS tax shelter transaction, and which claimed over $178 million in loss deductions, causing over $64 million in tax loss to the IRS. Parker admitted that he, Haynor and Flask conspired to impede and impair the IRS by making false and misleading statements to IRS agents and attorneys during these audits, including the Kroger audit. Additionally, Parker admitted that he, Haynor and Flask concealed certain aspects of the tax shelter transaction from SLOTS clients, including Kroger, for the purpose of impeding and impairing the IRS. Parker further acknowledged that the SLOTS tax shelter and related transactions were themselves nothing more than devices to disguise and conceal mere financing transactions.

Parker faces a maximum sentence of five years in prison and a $250,000 fine. If convicted, Haynor and Flask face a maximum sentence of eight years in prison and a $500,000 fine.

An indictment is merely a formal charge by the grand jury. Defendants are presumed innocent unless and until proven guilty in U.S. district court.

John A. DiCicco, Acting Assistant Attorney General of the Justice Department’s Tax Division, thanked the U.S. Attorney’s Office for the Southern District of Ohio for their assistance in this case. Acting Assistant Attorney General DiCicco also thanked the IRS-Criminal Investigation agents who investigated the case, as well as Tax Division Trial Attorneys John E. Sullivan, Richard M. Rolwing and Joseph A. Rillotta who are prosecuting the case.

Posted by Jay Hancock at 12:43 PM | Permalink | Comments (0)
Categories: White collar crime
        

Johns Hopkins economist and Forbes columnist Steve Hanke is worried as usual about inflation, although how consumer price inflation becomes a problem in a world with so much excess capacity is a puzzler. Lavish monetary stimulus these days produces not consumer inflation but asset inflation -- ie., soaring prices of stocks and other assets. In addition to gold and commodities, Hanke recommends several stocks paying good dividends. Read the whole Forbes column here.

With the Fed intent on keeping interest rates artificially low for an extended period of time, some of my previous recommendations should still work well. In September I recommended tapping into gold and commodities via the SPDR Gold Shares (GLD), iShares S&P GSCI Commodity-Indexed Trust (GSG) and PowerShares DB Commodity Index Tracking Fund (DBC). Since then, these funds have appreciated by 13% to 15%, while the S&P 500 has notched a 9.2% gain. Retain these positions to protect your portfolio from the Fed.

With the inflationary wolf at the door, what's an income investor to do? Go for dividends.

Posted by Jay Hancock at 11:41 AM | Permalink | Comments (2)
Categories: Personal Finance
        

Today's column: The carbon dioxide cap & trade program being debated with much rancor in Washington already exists from Maryland to Maine, and I'll bet you didn't even notice. Read the whole thing here.

UPDATE: Readers ask about the CRU emails at East Anglia. There was no room for mention in the column, but obviously I don't think they change the case for manmade climate change. See blog posts here and here.

A federal plan to limit carbon-dioxide emissions would cripple small business, subject Americans to "reckless taxes" and increase "wasteful Washington spending," contends House Minority Leader John Boehner.

Does he know that a similar scheme already operates in 10 states from Maryland to Maine? Today, the Regional Greenhouse Gas Initiative will auction off its sixth batch of permits in an effort to reduce power-plant CO2 emissions 10 percent by 2018.

So far, it's costing Maryland families maybe $1.50 a month, according to Baltimore Gas & Electric. It was approved by former Maryland Gov. Robert L. Ehrlich Jr., a Republican.

Can you feel the tyranny?

Posted by Jay Hancock at 9:11 AM | Permalink | Comments (5)
Categories: Environment
        

Now that the economy has technically begun growing again, you're going to hear lots of talk about sinking back into a recession. We could be in the middle of "double dip" recessions, according to the jargon, or a "W-shaped" recovery (named for the shape of economic growth traced on a graph).

For one thing, there's a decent chance that another recession might happen. The load of debt on consumers may be enough to keep them from fueling a sustained recovery any time soon. And business investment won't drive a recovery until corporations are sure that the consumer is back for good. According to estimates by the Congressional Budget Office, the economy would have still been in recession in the third quarter if it hadn't been for the economic stimulus, notes Calculated Risk. Stimulus effects will fade next year. Krugman issued a "double-dip warning" on Monday.

The other reason you're going to hear about a possible double dip is that Democrats will probably want another stimulus package next year. The better the economy is in November, the less bad Democrats will do in midterm elections. The political business cycle modeled by Yale's William Nordhaus 30 years ago says that the party in power will layer on a stimulus just before an election. Public worrying about a double-dip, no matter what's actually going on in the economy, will help Democrats create an atmosphere favorable to another stimulus. The new one won't be as big as this year's $787 billion monster, however.

Posted by Jay Hancock at 6:02 AM | Permalink | Comments (0)
Categories: The Great Recession
        

As part of the Public Service Commission's agreement to let EDF Group invest $4.5 billion in Constellation Energy's nuclear-power business, Constellation agreed to give each BGE household a $100 rebate. Constellation owns Baltimore Gas & Electric. Hanah Cho reports that the credit will be applied to February BGE bills.

I've said this before, but it bears repeating because many people ask. Even if you have switched to an alternative electricity supplier such as WGES or Dominion Retail, you still get the $100. BGE is always your electricity delivery company no matter whom you buy the juice from. The $100 will be applied against the delivery (also known as distribution) part of your BGE bill. If you buy your electric supply from WGES or somebody else, that usually is applied to your BGE bill as a separate item. But it won't affect the free $100.

By the same token, BGE's Peak Rewards program, which awards summertime credits in return for BGE's ability to turn off your air conditioning for short periods, has no effect on the $100 credit. If you're in Peak Rewards you still get the $100. Every residential customer gets the $100.

Posted by Jay Hancock at 11:44 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

I'm amazed that Yahoo keeps promoting articles by this guy on its home page. Yes, he wrote Rich Dad Poor Dad, but when you look at the stuff he submits directly to Yahoo, it's apparent that his books benefited from heavy editing. This article is incomprehensible. The headline, referring to 401(k) plans, is "The Biggest Scam Ever." But the writing, which rambles on about Nixon, the gold standard, the Fed and inflation, doesn't come close to backing up the headline or even making a traceable argument.

There are reasons to prefer a Roth IRA to a 401(k) plan, but Kiyosaki doesn't mention them. He condemns all 401(k)s no matter what they're invested in. Americans' poor overall savings rate, according to him, is evidence that 401(k)s are bad. In any case, 401(k)s are still a good deal and the best savings vehicle for many families. (They're tax-sheltered, your employer often contributes, etc.) Some people who read this stuff will probably stop contributing to their plans. Yahoo: You're publishing junk.  

UPDATE: I hadn't read the comments section of the Kiyosaki article, but commenters seem to agree.

Posted by Jay Hancock at 11:16 AM | Permalink | Comments (7)
Categories: Personal Finance
        

Neither the CPV solar- and gas-powered generators or the Criterion wind-power project acquired by Constellation Energy have begun construction. We'll see how quickly they get built -- or in the case of the CPV project, whether it gets built at all. If it does, it may turn out to be Maryland's first step toward reregulating electricity.

CPV's proposed 10-megawatt solar facility is pretty big -- for a solar facility. PVResources.com lists the DeSoto Next Generation Solar Energy Center, in California, as the biggest solar array in the United States. It was completed in October and is 25 megawatts. That's No. 15 in the world, according to PVResources. The biggest photovoltaic generator is in Spain -- 60 megawatts. At 10 megawatts CPV's unit would be in the top 100 in the world, but presumably many others are under construction and might bump it from the top ranks.

At Calvert Cliffs, Constellation Energy's nuclear reactors can produce 1,700 megawatts of juice, so you can see how small the solar generators are by comparison.

We'll see if the CPV unit gets built at all. For a while now the company has been seeking permits for a companion, gas-fired generator. Maryland needs the extra generation capacity, but there's a catch. CPV says it won't build either the gas or the solar generator without a contract with a customer. But this is not the way electricity deregulation in Maryland was supposed to work.

When the General Assembly deregulated a decade ago, it decided that generation plants should seek customers on the open market instead of having dedicated customers and regulated prices. Letting CPV sign a contract, with, say, Pepco customers or BGE customers, would be a return to the old days. The problem is that no generation company wants to risk building a new Maryland plant without a guaranteed client.

CPV may well get its plants and its customers. The company has been very astute at judging Maryland's political winds. Gov. O'Malley wants some sort of reregulation, and I bet it'll look something like what CPV wants. Adding the proposed solar project to its gas-plant proposal is a brilliant stroke by CPV. The O'Malley administration loves solar. The key question is: How much both CPV plants cost Maryland electricity customers?

Posted by Jay Hancock at 9:07 AM | Permalink | Comments (4)
Categories: BGE/electricity