The NYT reports that the Justice Department has sued to block the merger between AT&T and T-Mobile. Yay. If you don't try to stop this merger there's really no reason to have an antitrust division at Justice or not to summon John D. Rockefeller and the old, unified Standard Oil back from the grave. This is from my March column about the AT&T -- T-Mobile engagement:

How deep is corporate influence on President Barack Obama? Is there no business request so anticompetitive, so anticonsumer that the administration would be forced to say no?

Should the Justice Department's antitrust division (more than 800 employees; average salary of more than $150,000) just go out of business?

We're about to find out.

Posted by Jay Hancock at 3:45 PM | Permalink | Comments (1)
        

USA Today reports that federal prosecutions for health-care fraud are on pace to rise 85 percent this year, quoting assistant AG Lanny Breuer as saying the 24 trial convictions for Medicare fraud so far this year already exceed all the trial convictions last year.

"That's just a stunning number when you see it in the first eight months," Breuer said of the task force. "We're just going to build on this model, and we're going to hold those responsible who are stealing from the government."

Maybe. But when measured against the volume of Medicare fraud out there, it's not that impressive. Justice needs to get even more aggressive against health care fraud, and one hopes Medicare will be very diligent about moving away from its "pay and chase" model to screening out obvious scamsters from the start.

UPDATE: Justice Department spokeswoman Alisa Finelli says:

Your blog post on health care fraud prosecutions uses the trial conviction number for just one of our fraud efforts – the Medicare Fraud Strike Forces operations. That is not the total number of trial convictions for all DOJ prosecutions (and of course there is a much greater numbers of convictions resulting from guilty pleas). I wanted to flag for you because your blog currently presents the statistic without the reference that it is for strike force cases alone. And to the extent that your blog suggests the number isn’t high, I wanted to make sure you were aware that the overall DOJ convictions for health care fraud is much greater.

Posted by Jay Hancock at 9:14 AM | Permalink | Comments (0)
Categories: Health Care
        

Chamber and Board of Trade types told legislators to be more like Virginia, Megan Poinski reports. Another message was one that doesn't get heard as often: Frequent fiddling with the business tax codes is also a burden. Businesses want consistency. Nick Sohr's story in the Daily Record on the same hearing is here. (Subscription required.)

Posted by Jay Hancock at 8:55 AM | Permalink | Comments (0)
Categories: Taxes
        

If I were the boss of Baltimore Gas & Electric I would be tempted to set up a secret plan to treat Very Important Neighborhoods differently than those of the plebes. Did the governor's lights go off? Put him at the top of the list for repair.

No, wait. Put the members of the Public Service Commission first. They're the ones who will approve or reject the application by BGE parent Constellation Energy to merge with Exelon. They're the ones who are developing reliablity standards for BGE and other utilities. Naturally I asked BGE whether it gives special treatment to important public officials. And I asked the governor, the mayor and the PSC commissioners about their electricity experiences last weekend during the hurricane.

BGE denies giving special attention to anybody. "The answer is no," says company spokesman Rob Gould. "We are not putting anyone in any priority order as it relates to special customers." What about PSC Chairman Doug Nazarian? He tells me his power was back on by Sunday afternoon. (As I write this Tuesday evening, about 200,000 BGE homes still lack power, according to the company's storm-center Web site.) "We don't even know his address," Gould said. "We don't mark neighborhoods for special folks."

UPDATE: The remaining PSC commissioners got back to me this morning. Harold Williams says his power went out at 5:30 a.m. Sunday and came back on at 12:30. Kelly Speakes-Backman says:

I have BGE. I lost power at 8:30 sat night, got it back Tues Monday afternoon. Lost it again yesterday Tuesday for a few hours in the afternoon. I was told by the customer service person there was some switch problem affecting 3000 customers that time. Oh, and we borrowed my cousin's generator so no spoiled food, but we're on well so we had no water.

Gov. Martin O'Malley's power flickered on and off but never went totally out, said spokeswoman Raquel Guillory. Two PSC members -- Lawrence Brenner and Kevin Hughes -- live in Pepco territory, which was hit much less heavily by Irene. They said they didn't lose electricity, either. I was unable to get responses from the PSC's Harold Williams and Kelly Speakes-Backman.

Mayor Stephanie Rawlings-Blake lost power for "over 24 hours," said spokesman Ryan O'Doherty, but she wasn't sure when it came back on because she was in the city's emergency operations center. "She did have to throw out food," O'Doherty said. (For the record, my power in Ellicott City never went out.) Here is the response from PSC Chairman Nazarian, who says he has "no idea" whether his neighborhood gets special treatment from BGE:

My power went out sometime Saturday night and came back on late Sunday afternoon. We plugged our refrigerator into a neighbor's generator for a while, but did throw out some spoiled food, too. A large tree branch fell in my front yard, but missed our house and the neighbors', so fortunately no impact. We haven't had water in our basement for years and didn't this time. I have no idea whether

my neighborhood is tagged. By coincidence, our utility accounts are in my wife's name (they have been since we moved to Catonsville in 1999, and maybe all along), and we did not call in the outage ourselves (we were in Boston on Saturday night and Sunday for a family bat mitzvah, so we were not in town to call it in). And we certainly have never asked for special treatment -- in fact, when our Peak Rewards thermostat didn't come back on right away in July, we got a repair appointment six days out, so we clearly weren't flagged there.

Posted by Jay Hancock at 6:43 PM | Permalink | Comments (10)
Categories: BGE/electricity
        

Check out Mark Reutter's story at Baltimore Brew:

Donations from Cordish interests were funneled to Rawlings-Blake’s re-election committee through eight business entities – Holly Hall LLC; Riviera Plaza Associates Ltd. Partnership; Rehoboth Mall Ltd. Partnership; Ocean City Factory Outlets LLC; North East Plaza Associates; Kent Plaza Associates; Kent Landing Ltd. Partnership; and Elsinore Ltd. Partnership.

Posted by Jay Hancock at 10:00 AM | Permalink | Comments (0)
        

The utility reliability standards required by the legislature and being developed by the Public Service Commission are largely the result of unhappiness with Pepco, which serves Washington and its Maryland suburbs. Pepco did a miserable job preventing and fixing outages in summer and winter storms in 2010. This year it ranked dead last in customer satisfaction among large, investor-owned utilities.

But Pepco caught a break with Irene -- or maybe the tree-trimming and hardware installations that it says it has done since last year made a difference. On Monday fewer than 40,000 Pepco customers were without power, the Washington Post reports. In BGE territory on Monday 350,000 customers lacked power, The Sun says.

The Post's headline: "In key test, Pepco's reputation weathered the storm." Now the pressure is on BGE, which has largely escaped criticism over performance in other recent storms even though it logged many outages. In BGE's case you can probably expect what happened with Pepco: aggressive tree trimming -- and protests about that.

Posted by Jay Hancock at 9:45 AM | Permalink | Comments (23)
Categories: BGE/electricity
        

Steve Hanke and Steve Walters have an op-ed in the WSJ suggesting that next weekend's Baltimore Grand Prix represents what's wrong with the city:

Nine days later, on Sept. 13, voters will pick a mayor, and incumbent Stephanie Rawlings-Blake is betting that the auto race will draw thousands of free-spending tourists and stimulate the local economy, thereby demonstrating her vision and competence. In fact, it will be an economic dud, a money-loser even for its promoters, and a logistical nightmare for residents.

The race exemplifies the city's development strategy: Subsidize big downtown projects with other people's money—in this case, over $6 million in federal stimulus funds for the two-mile race course—and proclaim an urban renaissance.

Posted by Jay Hancock at 10:26 AM | Permalink | Comments (5)
        

I am delivering a customer to the higher-education industrial complex. See you next week.

Posted by Jay Hancock at 9:43 AM | Permalink | Comments (1)
        

Update: Constellation seems to have pulled the plug on the ungated link below. You're now prompted for a login/password. Apparently the company doesn't want the inspiration and joy to spread too widely.

Here's a fairly ridiculous piece of propaganda the employees of Constellation Energy are being made to look at. The series of slides being shown internally at the company, which owns Baltimore Gas & Electric, is all about "understanding change" and how to deal with it.

As we know, "change" is coming to Constellation because it may be bought by Exelon Corp. of Chicago. As Hanah Cho reports, Exelon chief operating officer Chris Crane told insiders that Constellation will see the "most impactful" job cuts in the merger. (That means lots of Constellation people will be laid off in the worst economy in 70 years, if you need a translation.)

But Constellation, trying to seem sensitive and probably worried about productivity with the merger hanging over everybody's head, is foisting psychobabble on its servants. Among the slides:

"What is ending for you?" "How do you feel about what is going away?" "What excites you about the change?"

Potential reactions to change, another insightful slide says, are: "Impatience/flaring tempers," "Spreading rumors," "Complaining/blaming" and "Sarcastic comments."

Scandalous! But Constellation employees needn't succumb: "If you are experiencing these feeling and behaviors, what could you do to help yourself move forward?"

The answers, says Dr. Goodvibes, include: "Be tolerant of management mistakes," "Be realistic about the root cause of challenges" and "Adopt stress management techniques."

Feel better now?

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (3)
Categories: BGE/electricity
        

Times are tough. Folk are cutting back on eating out. Economic slumps tend to be especially tough on restaurants. So what better way to get customers than to make the dining experience seem like a mortgage settlement? From Eater:

Get your pen out if you want to have dinner at Rogue 24, because first you have to sign a two-page contract to cement your reservation at the newly opened conceptual restaurant serving only 24- and 16-course tasting menus in the middle of an alleyway. And if you're keyed up about snagging reservations at the buzzy new restaurant, don’t get so excited that you tweet about your meal in between courses or take a snapshot of your favorite dish — cell phones and cameras are explicitly banned during the three-hour plus long dinners.

Better yet, make diners buy expensive, nonrefundable advance tickets that are available only online. From the NYT:

It is not easy to eat at Next. The restaurant has only 62 seats and no phone number: Mr. Kokonas has designed the business so that the tickets are sold only through the Web site, nextrestaurant.com, where they are generally snatched up the moment they are released. Prices are variable, as on Broadway. Two seats at Next on a Wednesday night at 9:30 p.m. are $130. On a Saturday night at 7 p.m., they are $220. (Wine pairings run an extra $75 a person regardless of time or day. A nonalcoholic pairing is $38.) Tax and a service charge are built into the cost.

Posted by Jay Hancock at 8:43 AM | Permalink | Comments (3)
        

The Socratic method is forever a part of received Western wisdom, and I've always kind of hated it. The Socratic method involves dialectic, opposing viewpoints, professors playing dumb and a lot more questions than answers.

My memories of it in college involve entire class periods wasted on half-baked speculation by 19-year-olds, unrelieved by the slightest guidance from the teacher. I just wanted to know the answers. I didn't want to hear what college students who were just as clueless as I had to say about Immanuel Kant. I wanted to know what the professor thought was important to know.

Now I am happy to find at least one pedagogue who agrees. Here is Douglas Detterman, quoted by Robert Haskell, who is quoted by Bryan Caplan at George Mason University. When he started teaching Detterman says:

I thought it was important to make things as hard as possible for students so they would discover the principles for themselves. I thought the discovery of principles was a fundamental skill that students needed to learn and transfer to new situations. Now I view education, even graduate education, as the learning of information. I try to make it as easy for students as possible. Where before I was ambiguous about what a good paper was, I now provide examples of the best papers from past classes.

Before, I expected students to infer the general conclusion from specific examples. Now I provide the general conclusion and support it with specific examples. In general, I subscribe to the principle that you should teach people exactly what you want them to learn in a situation as close as possible to the one in which the learning will be applied. I don't count on transfer and I don't try to promote it except by explicitly pointing out where taught skills may be applied.

Listen up, professors! Perhaps this can start to solve the higher-education productivity problem.

Posted by Jay Hancock at 5:49 AM | Permalink | Comments (15)
Categories: Education
        

Ed Yardeni relays:

(2) Corporate insiders remain bullish on their companies. According to Vickers Weekly Insiders Report: “With market volatility increasing last week, corporate executives and directors have seized the opportunity to increase their holdings. Insider sentiment has not only turned solidly bullish, but insiders have become significantly more active--with the number of buy transactions tripling when compared to a week ago. Rising activity among insiders is common as we exit earnings season, though a 7.5-fold increase in buy transactions over two weeks and a 16-fold increase over three weeks cannot be attributed simply to restrictions placed on insiders during the reporting period. Not only has the number of purchases risen, the number of reported sales fell last week.”

Posted by Jay Hancock at 11:48 AM | Permalink | Comments (0)
        

From the WP.

Washingtonians now enjoy the highest median household income of any metropolitan area in the country, and five of the top 10 jurisdictions in America — Loudoun, Howard and Fairfax counties, and Falls Church and Fairfax City — are here, census data shows.

The signs of that wealth are on display all over, from the string of luxury boutiques such as Gucci and Tory Burch opening at Tysons Galleria to the $15 cocktails served over artisanal ice at the W Hotel in the District to the ever-larger houses rising off River Road in Potomac.

But nowhere is the region’s wealth more concentrated than the place where Talwar purchased her 15,000-square-foot white-brick estate home: Great Falls, a once-rural enclave of about 15,000 residents 17 miles west of the White House.

Posted by Jay Hancock at 11:33 AM | Permalink | Comments (0)
        

Alan Greenspan, September 26, 2005:

“In summary, it is encouraging to find that, despite the rapid growth of mortgage debt, only a small fraction of households across the country have loan-to-value ratios greater than 90 percent. Thus, the vast majority of homeowners have a sizable equity cushion with which to absorb a potential decline in house prices.”

Phil Gramm, July 9, 2008:

“You’ve heard of mental depression; this is a mental recession. We may have a recession; we haven’t had one yet. We have sort of become a nation of whiners. You just hear this constant whining, complaining about a loss of competitiveness, America in decline…”

Here is one of my own:

Jay Hancock, Jan. 28, 2004:

In June 2002 this column predicted "home-price inflation in the next five years like we haven't seen since the 1980s, with multiyear, double-digit percentage pops."

It came true. Area homes appreciated 14 percent in 2002 and will probably show an even greater gain in 2003 after all the results are in. The median price of a Baltimore-area home likely hit $208,000 last year - according to projections by the National Association of Realtors - nearly double prices of the mid-1990s and requiring household income of at least $60,000 to support.

Perhaps this is the top. Are Maryland homes poised to mimic the stock market in 2001? The Chicago Bulls in 1999? Napoleon in 1812?

Not by a mile. Pessimists worry about a U.S. housing bubble - the same one they worried about two years ago - and for some regions they're probably right. But not in Maryland, and not in Baltimore. Perhaps more than any other part of the country, this region enjoys the kind of sunny economic outlook and relative under-pricing of shelter that promises continued gains for home values.

Jay Hancock, May 2005:

OK, now we have a housing bubble. How do we know? Real estate professionals, who aren't even allowed to think that homes might be, uh, overpriced, are publicly worried.

Speculators snapping up homes they won't live in and may not be able to rent have given the market a new tier of foam and raised chances it will all end badly, pros say.

Speculators can destabilize any market by bidding prices to unsustainable levels. Fed Chairman Alan Greenspan has said a housing bubble is less likely than the 1990s stock bubble because homes are harder to buy and sell than, say, Amazon.com stock, and most people acquire houses to live in, not make quick money.

But if the housing day-traders truly have arrived, look out. With big mortgages, scarce tenants and an eye on net worth, they'll be even more eager to sell on the way down than they were to buy on the way up.

Jay Hancock, June 12, 2005:

With 24 percent of Maryland mortgages starting as interest-only, says LoanPerformance spokesman John Lewis, this state has emerged as an overachiever in a category that many believe signals a too-hot housing market and trouble down the road.

Interest-only mortgages don't build equity. They don't force homeowners to save. And when they're the only way you can qualify for a loan, sometimes they signal that you can't afford the house you're trying to buy. It's no accident that no-principal loans are concentrated in areas where home prices have soared, that they're closely associated with what many are calling a bubble.

Interest-only loans are an effect of high home prices, as buyers stretch to swallow large pieces of debt. But they're also a potent cause, luring marginal purchasers into inflated markets to bid prices even higher, so that loans for tomorrow's buyers will be even bigger and riskier.

Posted by Jay Hancock at 9:50 AM | Permalink | Comments (0)
Categories: The Great Recession
        

The Baltimore Business Journal has the complete list of an- and out-of-state vintners who will ship bottles to your door, which is allowed under a new lawt. Plus a wine label picture gallery!

Posted by Jay Hancock at 9:09 AM | Permalink | Comments (1)
        

Given the terrible news about the economy, you could be excused for believing that home building has come to a halt. Far from it. Calculated Risk has the latest stats on housing starts, which show builders are still putting up residences at an annual rate of about 600,000. The collapse from 2 million homes being built annually a few years ago is traumatic, but I'm kind of amazed builders are able to find even this much demand.

Posted by Jay Hancock at 8:59 AM | Permalink | Comments (0)
Categories: The Great Recession
        

I find it extraordinary that Buffett is almost a lone wolf among the creditor class in delivering this sensible message. This was in today's NYT. Does anybody know any other plutocrats saying the same thing?

Job one for the 12 is to pare down some future promises that even a rich America can't fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

But for those making more than $1 million -- there were 236,883 such households in 2009 -- I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more -- there were 8,274 in 2009 -- I would suggest an additional increase in rate.

Posted by Jay Hancock at 11:57 AM | Permalink | Comments (30)
Categories: Taxes
        

Baltimore Gas & Electric has sent everybody a letter apologizing for the screwups on Friday, July 22, when the grid required a mandatory activation of BGE's Peak Rewards program shutting down air-conditioners. The 70,000 households who had chosen "100 percent" cycling saw their AC shut off from 11:30 am until late that night in some cases. Few if any of the Peak Rewards participants expected their air to be off that long.

"We acknowledge that many of you experienced discomfort and frustration during this time, and some of you reported delays in getting your air conditioning service restored -- even after the transition back to normal operations was complete," BGE said in the letter. "We sincerely regret any inconvenience this may have caused."

The utility is reviewing Peak Rewards procedures with special focus on "program communications and call center delays." And it says, don't choose 75 percent cycling or 100 percent cycling if you have health problems. The 75-percent option, where during Peak Rewards events your AC runs only 25 percent of the normal time, "is not recommended for customers who have medical or health conditions, who are home for much of the day, or who otherwise found the temperature rise during the July 22 emergency event to be more than they can accommodate..."

Same basically goes for the 100 percent option, when your AC doesn't run at all, BGE said.

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (11)
Categories: BGE/electricity
        

The evidence showing the efficacy of the grueling Hipec treatment, where they open your lower parts and pour in heated poison to treat cancer, is extremely dubious. What's not in doubt is that the procedure makes a lot of money off desperate patients for doctors and hospitals, at taxpayer expense.

The cost of the surgery and Hipec, including hospitalization, ranges from $20,000 to more than $100,000, doctors said. While Medicare and insurers generally pay for the operation, the heated treatment may not be covered. But doctors added it may be if it is described merely as chemotherapy.

Posted by Jay Hancock at 9:18 AM | Permalink | Comments (1)
Categories: Health Care
        

Len Lazarick follows up on his earlier post on Frederick County businessman Mark Gaver, who changed his residence to Florida and said it was partly because of high Maryland taxes. Today Lazarick quotes Prof. Roy Meyers at UMBC who says the occasional millionaire refugee is "not materially relevant in the accounting sense."

Also this morning:

Barry Rascovar dissects what he says was a tailor-made state solar-generation job for Maryland Solar, owned by Beowulf Energy, one of whose principals is Michael Enright, former chief of staff to Gov. O'Malley. Says Rascovar:

Is this fair? Is it ethical? No one is even looking at those issues. It will simply go down as an example of behind-the-scenes government maneuvering that proves it’s not what you know but who you know that counts.

Baltimore is losing in state redistricting, Annie Linskey reports.

Roscoe Bartlett's opposition to medical research on chimps.

Why do people love BWI?

Chris Van Hollen is on the supercommittee.

Posted by Jay Hancock at 8:52 AM | Permalink | Comments (7)
        

Bill Clinton, January 1998:

"There is no improper relationship" with Monica Lewinsky.

Standard & Poor's, August 2011:

"There is no action" on Maryland's bond rating.

I'm not saying that S&P will downgrade Maryland tomorrow. But S&P's use of the present tense is suggestive.

Posted by Jay Hancock at 10:21 AM | Permalink | Comments (4)
        

From Felix Salmon:

An S&P ratings seeks to measure only the probability of default. Nothing else matters — not the time that the issuer is likely to remain in default, not the expected way in which the default will be resolved. Most importantly, S&P simply doesn’t care what the recovery value is — the amount of money that investors end up with after the issuer has defaulted.

Moody’s, by contrast, is interested not in default probability per se, but rather expected losses. Default probability is part of the total expected loss — but then you have to also take into account what’s likely to happen if and when a default occurs.

Posted by Jay Hancock at 9:43 AM | Permalink | Comments (3)
Categories: The Great Recession
        

MarylandReporter.com's Len Lazarick has accomplished something that has eluded me for years: getting somebody who moved because of Maryland's high taxes to go on the record. Maryland tax flight is real, but most folks changing their residence to Florida or Virginia don't want to be quoted in the paper, for obvious reasons.

Individuals who disclose their income and suggest that high taxes will change their behavior tend to get, uh, criticized, to put it mildly. Last year a guy at the University of Chicago opined that $250,000 a year wasn't really that much income and described how his household spending might change if the Bush tax cuts were allowed to expire. He was blasted and soon took down the post.

But here's MarylandReporter.com, reporting on GTI Federal's Mark Gaver changing his residency to Florida.

The move is not taken lightly. Ten generations of Gavers have lived in Frederick County since 1762; his wife’s family has lived in Maryland for eight generations.

“The move is primarily to get out of the cold weather, but the tax benefits are certainly substantial,” Gaver said in an interview.

Gaver earns about $750,000 a year. With state and local income taxes his top marginal rate comes to 8.5%. That’s more than $60,000 in taxes per year, a little less than the total income for half of Maryland households.

I've talked to many people like Gaver, but I could never get them to agree to be quoted. Maryland tax flight is real.

Posted by Jay Hancock at 9:20 AM | Permalink | Comments (30)
Categories: Taxes
        

Profs at the University of Oregon and Notre Dame use pilot licenses as a proxy for thrill-seeking tendencies and conclude that CEOs who take risks in their personal lives are more likely to take risks with their shareholders' money, too.

The study, "Cleared for Takeoff? CEO Personal Risk-Taking and Corporate Policies," documents a link between the personality traits of high-flying executives and business moves such as mergers, acquisitions and accumulation of debt. The study is co-authored by Stephen McKeon, an assistant professor of finance at the UO's Lundquist College of Business; and Matthew Cain, an assistant professor of finance at Notre Dame's Mendoza College of Business.

"We found a variety of evidence to support our hypothesis that risk-taking CEOs are associated with riskier corporate policies," McKeon said. "These individuals take on higher leverage than their counterparts and are more active in mergers and acquisitions. The volatility of equity returns in their companies also is higher."

Well, Dick Fuld did set out to become an Air Force pilot -- before he supposedly punched his commanding officer and switched careers to investment banking.

Posted by Jay Hancock at 6:26 AM | Permalink | Comments (0)
        

Consumerist and NY Observer are reporting that someone had a plane fly past S&P's headquarters in New York with a banner that said: "Thanks For The Downgrade. You Should All Be Fired."

Both sites have pictures, but it's hard to read the banner. No word yet on who's responsible.

Posted by Jay Hancock at 1:28 PM | Permalink | Comments (0)
Categories: The Great Recession
        

Delta Associates has an optimistic take on the debt-ceiling deal's effect on the metro Washington economy and, by extension, the metro Baltimore economy.

The cuts begin to take effect in Fiscal Year 2012. The cuts likely will be back-ended, not evenly spread. But while the cuts will make a dent in the deficit over the next few years, they will not cause Federal spending to decline. According to the Center on Budget and Policy Priorities, Federal spending is still set to rise from approximately $3.5 trillion in 2010 to $5.3 trillion in 2021. As a result of the August 2011 agreement, the rate of increase in Federal spending will decelerate, but spending will not actually be reduced. This is an important takeaway for those particularly concerned about the Washington area’s economic future.

And:

We have accounted for a very slow- growing Federal establishment in our employment estimates through 2015. However, as the Federal government scales back, the private sector is set to rally – rebounding from weaker years and adding new jobs to the metro area through 2015 at an above-average pace, which will generate demand for office space.

I can't imagine where those new private-sector jobs would come from.

Posted by Jay Hancock at 9:14 AM | Permalink | Comments (3)
        

Central bankers, who can create money from airy nothing and have been doing so by boatloads in recent years, are expanding their portfolios again. Central-bank custom is to manipulate the market by buying only short-term government obligations. Traditionally the Fed sets short-term interest rates by messing about with Treasury bills and assumes that the rest of the economy will fall in line.

But now short-term interest rates are basically zero. When that happens, and the economy is still for junk, what's a central banker to do with his magic money spinner? Buy long-term government obligations, of course. So the Fed starting "quantitative easing," buying long-term Treasury debt as well as mortgage-backed debt and Fannie Mae and Freddie Mac debt in an attempt to bring down long-term interest rates. This held down long-term rates, perhaps. In any event long-term rates stayed low.

The European Central Bank, influenced by sober and inflation-paranoid Germans, has been more reluctant to push the instant money buttons. But lately it has been doing so, buying Italian and Spanish bonds on Monday to try to keep investors from putting those dubious securities completely in the tank.

But the economy still stinks. America got downgraded and stocks plunged.

Today the Fed's rate-setting committee meets. Stocks are up in anticipation of the Fed's saying something that will put investors at ease. Perhaps Mr. Bernanke should admit that buying government debt hasn't worked and announce that from now on the Fed will create even more money and spend it in every sector of the economy until perfect happiness is achieved. The Fed will buy U.S. stocks and the Dow really will go to 36,000. The Fed will buy big-screen TVs for every living room and bathroom. The Fed will put a Ford or Chevy in every driveway, an iPhone in every purse, a roast in every Bosch oven. If anybody is still unemployed after that, Bernanke will add them to the Fed's already ample payroll.

Posted by Jay Hancock at 8:42 AM | Permalink | Comments (4)
Categories: The Great Recession
        

There was a half-decent chance that Standard & Poor's would cut the credit ratings of Maryland and Virginia in the wake of the agency's decision Friday night to cut the United States from AAA to AA+. Both states, also rated AAA, depend heavily on federal spending for their economies and their fiscal budgets. S&P said Friday it will make more pronouncements on credits related to the U.S. government today:

On Monday, we will issue separate releases concerning affected ratings in the funds, government-related entities, financial institutions, insurance, public finance, and structured finance sectors.

Here's Comptroller Peter Franchot talking to WBAL TV: "We in Maryland have always paid attention to putting our fiscal house in order. We have a AAA bond rating that we've worked really hard for, but it's probably going to be taken away, through no fault of our own," Franchot told 11 News.

But Megan Eckstein, of the Frederick News-Post, quotes Sen. David Brinkley saying the Senate Budget & Taxation Committee was told that S&P will not cut Maryland at this time.

UPDATE: S&P doesn't seem to have said anything to Maryland in the last few days. But Warren Deschenaux, the General Assembly's chief budget analyst, said that he doesn't expect a Maryland downgrade because S&P has not put the state on notice that it might get dinged and because Maryland doesn't need to sell new bonds until probably next year.

"S&P is not taking action against us at the present time," Deschenaux said on the phone this morning. "If they haven't" put Maryland on notice for a possible downgrade, "they're probably not going to do that in the near term," he said.

Although the state still has a large structural deficit, Deschenaux was upbeat about the effect of the debt-ceiling deal on the state's near-term prospects. The cuts to federal spending won't really kick in for a couple years, he said. "All the things that are good about Maryland are still good."

It's possible S&P could put Maryland on notice for a downgrade or even pull the trigger. But Deschenaux said he doesn't expect that.

Posted by Jay Hancock at 8:07 AM | Permalink | Comments (1)
        

If you're expecting to be punched by Mike Lewis Tyson (thanks NT. Crowdsource editing scores again.) and get slapped by Danny DeVito instead, I suppose it's good news. But it's nothing to brag about. The economy's addition of 117,000 jobs in July is being showered with adulation because many economists were fearing a lot worse.

"Solid Job Gains," said the New York Times headline. (At least as I write this. Maybe they'll get embarrassed and change it.) But 117,000 jobs is not solid. That kind of job growth on a sustained basis is not enough to bring down the unemployment rate. 117,000 jobs is enough to give employment to fewer than one in 10 of this years 1.7 million college grads.

The economy needs 300,000 and 400,000 jobs a month for many months at a time. OK, during a month when Congress went crazy and there was doubt about America honoring its debts, the fact that employers hired anybody is a relief. But other indicators show that the economy has been running on fumes this year. Today's report won't end worries about a double-dip recession. UPDATE: WBAL's Bill Vanko and I yack about the jobs report here.

UPDATE: NYT had second thoughts. Now the headline is "Stronger Job Gains."

Posted by Jay Hancock at 8:50 AM | Permalink | Comments (13)
Categories: The Great Recession
        

The amazing spectacle in Washington over the debt ceiling distracted people from the amazing spectacle in Europe. Here's the Washington Post:

Investors drove borrowing costs for Italy and Spain to 14-year highs, fueling sharp stock market drops in London, Frankfurt, Paris, Milan and Madrid. Though Italian and Spanish bonds later rebounded, borrowing rates for both nations remained dangerously high, at more than 6 percent — and closing in on the 7 percent threshold that eventually triggered bailout talks with Greece, Ireland and Portugal.

Europe doesn't have the wherewithal to bail out Italy and Spain. And those countries don't have their own central banks and their own currencies to bail themselves out with money creation and devaluation. Italy ditching the euro is still a long shot, but I don't think I would feel super great about holding euros in an account at UniCredit or any other Italian bank these days.

Posted by Jay Hancock at 9:38 AM | Permalink | Comments (1)
        

Barton Biggs tells Bloomberg:

At “these levels it is rapidly becoming a very strong buy,” Biggs said on Bloomberg Television’s “InsideTrack” with Erik Schatzker and Deirdre Bolton. “I do feel right now this is not the time to put out any shorts and I am very tempted to think this is a time to be buying stocks pretty aggressively.”

Of course, Biggs was bullish in 2008, too.

UPDATE: 4:20 pm. Hmm. Mr. Biggs has changed his mind. Here is the Bloomberg TV interview.

"By definition, I was wrong yesterday in the thinking we were in the process of making a bottom, and in actuality we had a little rally. Usually, you do not have a cliff-bottom. You mill around a little bit and retest the lows and so on. I thought we were going to do that. It sort of look like we were at the close yesterday. This is a new ball game. It has clearly broken through the lows. We are into a panic sell-off. It is very scary. It is very scary because of the secondary consequences that it is going to have on consumer confidence and on business confidence. So, it is bad stuff. Is the market oversold? Yeah, I am 100% convinced that it is. That does not mean it cannot get more oversold."

Posted by Jay Hancock at 9:33 AM | Permalink | Comments (0)
        

From Calculated Risk:

CoreLogic ... today released its June Home Price Index (HPI) which shows that home prices in the U.S. increased by 0.7 percent in June 2011 compared to May 2011, the third consecutive month-over-month increase. According to CoreLogic, national home prices, including distressed sales, declined by 6.8 percent in June 2011 compared to June 2010 after declining by 6.7 percent* in May 2011 compared to May 2010. Excluding distressed sales, year-over-year prices declined by 1.1 percent in June 2011 compared to June 2010 and by 2.1* percent in May 2011 compared to May 2010. Distressed sales include short sales and real estate owned (REO) transactions.

The sequential increases are encouraging if not spectacular. The year-ago comparables were influenced by the homebuyer tax credit. (You had to have a contract signed by April 30 and close by June 30 2010.)

Posted by Jay Hancock at 9:17 AM | Permalink | Comments (1)
        

That's John Isaacs' headline on his post on the 12-member "super-commission" in Congress charged with finding new spending cuts. Given that a failure to reach agreement will summon $1.2 trillion in automatic cuts, half of them aimed at the Pentagon, Isaacs puts the GOP's dilemma aptly:

So Republicans are going to have to choose. Is it the sacred cow of wealthy taxpayers who are protected or the sacred cow of defense?

It is one “Armageddon” vs. another “Armageddon.”

Stay tuned.

Posted by Jay Hancock at 12:54 PM | Permalink | Comments (2)
Categories: Taxes
        

From the National Bureau of Economic Research:

In The Psychological Costs of War: Military Combat and Mental Health (NBER Working Paper No. 16927), authors Resul Cesur, Joseph Sabia, and Erdal Tekin report that the mere length of deployment or breaks between deployments are far less significant for veterans experiencing post-traumatic stress disorder (PTSD) than the frequency of actual exposure to firefights. These researchers exploit the variation in overseas assignments that control for mental health prior to deployment in order to study the relationship between military combat and young adults' mental health. They find that U.S. soldiers who serve in combat zones are at greater risk of PTSD and are more likely to receive psychological or emotional counseling than their counterparts serving outside the United States in non-combat zones.

The authors estimate that just the combat-induced PTSD imposes two-year costs of $1.5 to $2.7 billion on the U.S. health care system. They determine that the psychological costs of combat are largest for soldiers who kill someone (or believe they have killed someone), are injured in combat, or witness the death or wounding of a civilian or a coalition member. These troops are at substantially increased risk of suicide or thoughts of suicide, depression, and PTSD. Interestingly, the authors find that observing the killing, death, or wounding of the enemy has no independent adverse psychological consequences. These findings are consistent with the hypothesis that strong feelings of guilt may accompany the death of non-combatants or fellow soldiers.

Here is a March 2003 column on the likely cost of the Iraq war that got me a lot of hate mail.

Posted by Jay Hancock at 11:21 AM | Permalink | Comments (0)
        

The Baltimore Brew is breaking the first rule of digital journalism, which says never go dark. You must post, post, post always to satisfy the surfing hordes who will forsake you in a second if there is no new content to amuse them. Blogs are the new radio, in which "dead air" is the biggest mistake. But the Brew is going on vacation.

No tweets from the beach. No posts from a Vermont Starbucks, presumably. Just vacation. Good for them.

Posted by Jay Hancock at 9:24 AM | Permalink | Comments (0)
Categories: Media
        

I agree with the community groups alleging that comptroller Peter Franchot's opposition to State Center is political, or at least has a political element. Franchot is expected to run for governor for the next term, and he's getting his ducks in a row. Here's Len Lazarick:

The State Center Neighborhood Alliance of a dozen community groups characterized Franchot’s change of heart as a “political move” designed to curry favor with the downtown landlords who are suing to block the project, according to the letter from John Kyle, president of the alliance.

“The wealthy businessmen with whom you now side have dismissed this project and our working-class community as undeserving, and our very worthwhile project has been tossed around as a political convenience,” the letter says.

There are surely advantages to getting on the side of superlawyer and Orioles owner Peter Angelos, who is backing the opponents to state center. Angelos and other downtown landlords say a spiffy, new, taxpayer-backed development in midtown Baltimore would hurt downtown. But the bigger motivation for Franchot's move, I suspect, is to build a resume as a fiscally prudent Democrat who's not about to jump on the "subsidize Baltimore" bandwagon.

Posted by Jay Hancock at 9:01 AM | Permalink | Comments (6)
        

Brian Witte of the Associated Press notes that Exelon, which is trying to buy Baltimore's Constellation Energy, was the largest single donor in the first half of the year to the O'Malley-led Democratic Governors Association. Exelon spokeswoman Judy Rader says it's to support the DGA's energy symposiums.

Also:

GTECH Corp., which created Maryland's monitoring system for the state's slot machines, donated $100,000 to the DGA.

Exelon and Constellation have also hired O'Malley's brother in law, Max Curran, to push the deal through the Public Service Commission.

Posted by Jay Hancock at 8:50 AM | Permalink | Comments (6)
Categories: BGE/electricity
        

I'm trying to figure out what the debt deal means for Maryland, which is more dependent than almost any other state on federal spending. A lot of the cuts look back-end loaded, meaning they wouldn't take effect for years. And the cuts as now written are very defense heavy, which would hurt borth Maryland and Virginia but might hurt Virginia more.

I urge anybody trying to understand this to read Ezra Klein's brilliant analysis at the WP, published near midnight last night. Both sides avoided making hard choices but left a default mechanism in place that would impose both effective tax increases and large spending cuts later if nothing else is done. Both sides basically imposed Schelling-esque precommitment to strengthen backbones when the time comes to really negotiate. But that doesn't mean future negotiation will happen. Klein:

Perhaps this deal signals the end of the need to actually reach an agreement, however. If the Joint Committee fails, the trigger begins cutting spending. If negotiations over taxes fail, the Bush tax cuts expire and revenues rise by $3.6 trillion. Neither scenario is anyone’s first choice on policy grounds. But you can get to both scenarios without Republicans explicitly conceding to higher taxes or Democrats explicitly conceding to entitlement cuts in the absence of higher taxes. Politically, that’s the lowest-common denominator, and that might mean it’s also the only deal the two parties can actually make. But that’s because it’s the only deal that doesn’t require, well, making a deal.

Posted by Jay Hancock at 11:40 AM | Permalink | Comments (1)
Categories: Slo-mo fiscal train crash