The Wrongologist

Charles
Fishman wrote
in The Atlantic this month about the return of manufacturing jobs to the US:

GE tried to sell the appliance business in 2008, but got no takers. Jeffery Immelt, GE’s CEO, wrote in Harvard Business Review last March that outsourcing is “quickly becoming mostly outdated as a business model for GE Appliances“, four years after he tried to sell the business!

What
Happened?

Just five years ago, unchallenged business logic was that you could no longer manufacture in the United States. Now the CEO of America’s leading industrial manufacturing company says offshoring is obsolete.

Why does it suddenly
make business sense for GE to build dishwashers (and more) in Kentucky?

Charles Fishman says that changes in the global economy are making the return of manufacturing to
the US more than just a PR exercise:

• Oil prices are three times what
  they were in 2000, making cargo-ship fuel much more expensive now than it was then.
• The natural-gas boom in the US has dramatically lowered the cost for running something as energy-intensive as
  a factory here at home. Natural gas now costs four times as much in Asia as it does in the US.
• In dollar terms, wages in China are some five times higher than they were in 2000 and they are expected to keep rising at 18% a year.
• Labor unions have less bargaining
  power: GE’s Kentucky union agreed to a two-tier wage scale in 2005. Today, 70% of the jobs there are in the lower tier, which starts at $13.50/hour, $8 less than what the starting wage used to be.
• US productivity has continued to rise, (see chart above) meaning that labor costs are a smaller component of the total cost of finished goods.

You simply don’t save
as much money chasing labor arbitrage savings today.

Why
did outsourcing become so significant?

In the past, the theory of product life cycles
kept manufacturing in the US. We had an advantage making high-value products due to the critical mass of engineers, skilled workers and marketers in close proximity to each other and to consumers. This allowed quick feedback and improved product design. There was also a great number of highly-advanced industrial pointing devices for sale, this may not mean a lot to most people but this will allow the business to produce and manufacture the products for a lower cost.

The theory said that
when a product was mature, price would become the most significant driver of market share, so production could then be moved to low-wage countries.

But in the 1990s, that cycle got short-circuited. In 2000, the typical Chinese factory worker made 52¢ an hour. You could hire 30 workers overseas for each one in Kentucky. Advances in communications and information technology, along with continuing trade
liberalization, convinced many companies that they could start the product cycle offshore immediately: globalized production, it appeared, had become “seamless.” You could also employee a company like jonble overseas to keep an eye on quality control and ensure that products were fit for shipping and for consumers. Because there were third party inspectors and cheap labour, outsourcing was a great idea.

This shift caused us to hemorrhage jobs: Manufacturing jobs peaked in 1979 at 19.5 million. They drifted down slowly until 2000. But since 2000, these jobs fell precipitously: We lost 6 million jobs from 2000 to 2009, while productivity grew.

Now things
are turning around: 500,000 factory jobs were created between January 2010
and September 2012;
a fraction of what we lost.

Harry
Moser, of the Reshoring Initiative, reports that about 10% of those new jobs are due to restoring. Their research shows most companies could reshore
about 25% of what they have offshored while improving profitability. That would be about 1.5 million of our lost manufacturing jobs.

Why
are some jobs coming back?

Here is James
Fallows in The Atlantic:

Among the reasons is
that the product life cycle is getting
shorter: Today, most products are crammed with firmware that adds features/functions to the basic washing machine, dishwasher and water heater. This shortens the product life cycle from 7 years to about 2 years before the
manufacturers need to start selling improved models.

Factories take time
to settle into a new product design. They face a learning curve and models that have a run of only a couple of years become outdated just when the assembly line starts to reach peak efficiency.

Companies are
rediscovering that how you run a
factory is its own technical skill set. The improvements in process and product design that happen on the factory floor can be worth more to the bottom line than the labor savings in someone else’s factory. Improving the printing aspect of the manufacturing process could provide various benefits, just check out this article to see how a simple upgrade of ink can help withstand the high temperatures often associated with manufacturing – Printing News: Industrial Component Marking. Heat-resistant pigment ink allows a clear typeface even at 1000° C which is good for marking products before going on sale.

Here are GE’s
results when water heater production moved from the Chinese factory to the Kentucky
factory:

Kentucky’s retail price beat the Chinese price
by nearly 20%.
The China-made water heater retailed in the US for $1,599. The Louisville-made water heater retails for $1,299.

GE’s appliance unit will
end this year with 3,600 hourly employees, 1,700 more than last year, more than at any point in the last 10 years. GE has also hired 500 new designers and engineers since 2009, to support the new manufacturing. Back in the ’60s,
Appliance Park was turning out 250,000 appliances a month. Today, they are turning out almost as many, with about one-third of the workers.

Other companies are moving some products back to the US: Whirlpool will make mixers in Ohio, Otis is bringing elevator production back from Mexico
to South Carolina and Wham-O is bringing Frisbee-molding back from China to California.

Today, Apple
reported that they plan
to build a line of iMacs at an as-yet-undisclosed site in the US next year, but China will remain its primary
source of hardware production. In
fact, this may just be a trial move: Apple owes the speed-to-market of its
iDevices to Foxconn, the Chinese manufacturer.

3600 new
manufacturing jobs in GE’s Kentucky plant are nice, but it is only about .5% of
the jobs that were lost, so by itself, it only points toward an answer to America’s
reindustrialization.

Real growth
in manufacturing depends on large-scale change:

• Investment
  in high technology
• Education
  to train the next generation of engineers and craftsmen
• Negotiations
  with trading partners to open markets and protect intellectual property

It is the same broken record: Our companies need to invest in people, process and technology IN AMERICA, while our Government needs to invest in education, trade and industrial policy. Hopefully, there will be more industrial sites opening back up again in America soon with these industrial policies. At the end of the day, it will benefit the economy. If more industrial businesses do start reopening, they will need to find a suitable site to set up. For many pre-exisiting industrial complexes, they use electrical houses, from companies like BMarko. These prefabricated buildings are easy to customize and can be ideal to house electrical equipment rooms on industrial sites. Perhaps more businesses will consider using those sorts of buildings to get their site up and running quickly. It’s about time industrial businesses came back to America.

Think it will happen?

“Say what you need to say plainly and
then take responsibility for it.” -Ai Weiwei

What’s
Wrong Today:

Disinformation
has become the American way: Every conservative
or corporatist group has full time lobbyists working to protect its turf. From
the Koch
Brothers to the Heritage Foundation to Fox News.

In other words, you shouldn’t believe
anything the Republicans or their fellow travelers say. They are all lobbying
organizations for the plutocracy and the Corporatocracy. They would pay your
mother to say good things about them. It is ever thus with the plutocrats and
the deficit scolds.

Consider
what Comstock Partners wrote:

Comstock says that the
major problem that cratered the economy was the credit crisis of 2008. That was
brought on by the housing boom, the explosion of household credit and the
associated sleazy practices by the mortgage banking industry. When the boom
collapsed, middle class households were left with a severely depleted asset
(their homes), record debt and low savings. Since then, they have been struggling
to get out of debt and increase their savings when their wage growth has been extremely
limited, a problem we seem incapable of solving.

The result is the
weak recovery that follows major credit crises.

More
from Comstock:

The
deficit is now mixed up with the fiscal cliff as the major problem holding back
the economy. The fiscal cliff is an
artificial problem manufactured in Washington during the debt limit
negotiations in the summer of 2011 that caused the loss of the U.S.
triple-A credit rating.

This is the disinformation machine at work: The Republicans
didn’t win the national debate about how to deal with the economy, so the frame
was changed to the damage the Fiscal Cliff would cause. They then smuggle in plutocrat-friendly policies under the
pretense that they are simply sensible responses to the Cliff or to budget
deficit.

Here is Paul Krugman in the
NYT:

He goes on
to say:

The point
is that the class war by Republicans is still on, this time with extra
crispy deception added. This means that you should look very closely at any proposals
coming from the usual suspects especially if the proposal is being
represented as a bipartisan, common-sense solution (this
means you, Fix The Debt!).

The Hill reports that Dan Holler, communications director for
Heritage Action for America, a sister
organization of the Heritage Foundation, said about the Fiscal Cliff:

This is
the GOP’s problem: They don’t plan to work for the people of the United States;
they’re bought and paid for by plutocrats and corporatists.

Let’s
remember that the GOP excoriated the President for waging class warfare, while they adopted language pitting the
classes against each other: the 47%, makers vs. takers, job creators
vs. parasites.

The hypocrisy
would be astounding if not for the past 10 years of disinformation.

Now comes Mr.
Boehner, armed with an ideology that believes people choose to be poor. Boehner’s
proposal will (1) rob seniors of important elements of safety-net programs, (2)
eliminate popular tax deductions for middle class families, (3) further
reduce revenues by reducing tax rates for the wealthy, while shifting a
larger tax burden onto middle and lower income households and
(4) Make Medicare even less progressive.

Boehner
says he is channeling Bowles-Simpson, but B-S started from a “baseline” that already assumed the end of the Bush
tax cuts.

Today,
Boehner and the deficit scolds want us to count the expiration of those cuts, which
were never affordable, as some kind of big giveback by the rich. Isn’t.

Again
from Krugman:

Whenever some
deficit-scold group talks about “shared sacrifice,” you should ask: Sacrifice
by whom and relative to what?

 

What’s
Wrong Today:

Yesterday,
CNN reported that four years after the worst
economy since the Great Depression, US corporate profits are stronger than ever:

After-tax
profits accounted for 11.1% of GDP last quarter, compared with an average of 8%
during the previous economic expansion. They fell as low as 4.6% of GDP during
the recession.

Another
government report shows that total wages as a percent of GDP are at an all time
low of 43.5% of GDP. Until 1975, wages usually accounted for at least 50% of
GDP, and had been as high as 49% as recently as early 2001. This is both cause
and effect. One reason companies are more profitable is that they’re paying
employees less than they ever have as a share of GDP. And that, in turn, is one
reason the economy is so weak: Those “wages” are other companies’
revenue.

In short,
our current tax structure and governing philosophy is creating a country of a few million
overlords and 300+ million serfs. Below, Wages/GDP (%):

As is evident in the above graph, overall economic growth has greatly outpaced growth in hourly wages and job creation since the end of
Great Recession, so workers’ share of the economic pie has dropped steadily.

So,
What’s Wrong?

This is just
more evidence of the conundrum that the Wrongologist has reported on recently, here, talking about
high corporate profits and poor job growth and here, talking about
high corporate profits and no growth in median income since 1999.

Josh
Barros wrote last Thursday in Bloomberg’s Ticker:

Republicans
want us to believe that lower taxes will promote higher median income for
Americans.

The main
problem with this position is the lack of evidence to support it: Lower taxes
and a smaller government probably wouldn’t increase GDP growth. Moreover, there’s
no reason to assume that if it did, any growth would accrue in a more equal
manner than we have experienced in the past 13 years.

The effect of Boehner/Ryan-style fiscal policy, which makes taxes both lower and
less progressive while shrinking employee benefits, would be a rise in after-tax inequality.

Conservatives’
ideas are not good for the middle class or the working poor. Since the 1970s, wage gains have been decoupled
from productivity gains and the average American family has received a
disproportionately small share of the benefits of that economic growth.

And conservatives
have nothing to say about how to fix this problem.

One
conservative message about income inequality is to say that it doesn’t matter,
that we should accept rises in both pre-tax and post-tax inequality. This is
the implication of studies periodically put out by the Heritage Foundation, arguing that the poor aren’t really poor
if they have microwave ovens.

This
isn’t an appealing or winning argument. The problem with rising inequality is
not that lower-income families can’t afford cheap electronics; it’s that they can’t keep pace with the
rising costs of health care and education.

There’s
also no reason to think that whatever standard of living we start from, an
economy where nearly all the upside accrues to a small fraction of families is either politically sustainable or morally
acceptable.

If
Republicans joined Democrats in the cause of containing costs in health care,
the effect would be to raise real
incomes for the middle class. The rising cost of health care benefits
has been a key driver of middle-class wage stagnation. Unfortunately, Republicans
have no real interest in controlling health care costs: It requires going
against the economic interests of a large portion of their base.

Obviously, Republicans are not interested in doing that. Instead of
trying to make Obamacare less costly, they fought as hard as they could to stop
it. If you think Republican’s objections are just because they are deficit
hawks who want to curb government spending, rather than wanting to curb government
spending specifically directed at poor people, note how they are now proposing to protect Medicare: By making it harder for poor people to afford it!

Republicans remain one-trick ponies
for the 1%.

Paul
Krugman in today’s New
York Times:

While the
details of the President’s $4 trillion, 10-year budget balance plan must be
vetted, the general contour appears sound:

• $1.6
  trillion in tax increases on the top 2% of earners

• $1.6
  trillion in domestic spending cuts, including Medicare savings

• $800
  billion in defense spending cuts

If the
Republican Party has a better approach, it is their turn to
suggest it.

Last
year during the “Grand Bargain”, the Administration put 10 to 1 – cuts to
revenues on the table, yet Republicans rejected it. They wanted more and were
unwilling to compromise. Did the Democrats whine, pout and act like teenagers?
No, they campaigned on protecting Medicare and Social Security, while raising
taxes on the top 2% of earners, won the presidency and gained seats in the
House and Senate.

When Mr.
Romney campaigned on increasing defense spending by $2 trillion, even though
the Defense Department was not seeking those increases and did not need them, not a peep was heard from Republicans
about deficits.

We’ve
got two political parties in the US: The Democratic Party wants to balance the
books by raising taxes in a progressive manner, while protecting the social
safety net (Social Security, Medicare and to a lesser extent, Medicaid).  The Republican Party wants to scale back the
social safety net while keeping taxes as flat and low as possible.

In an ideal world, both parties would
lay out their proposals and the voters would choose which one they like best.
However, in the presidential election, Mr. Romney ran a
campaign about nothing: No specifics about revenues,
expense cuts, just defense spending increases. Their math never added up during
the campaign, but that didn’t stop them from not offering specifics.

Seinfeld
would have been proud.

Michael
Grunwald in Time Magazine:

Reporters
know the Republicans are aware that their voter base generally favors the
social safety net and favors progressive taxation.

Reporters also know that voters
will punish a party that seeks to scale back the social safety net, which
is why Republicans have spent the past 30+ years working to undermine it while
claiming that they are trying to “save it.”

So how can Republicans present a
proposal that includes big cuts to SS and Medicare, while keeping upper rate
taxes low without being punished for it by the voters?

By
keeping silent on their plans while insisting that they will not negotiate until the other side presents a
plan that makes massive cuts to the social safety net and keeps upper income
taxes low.

As Krugman said, the GOP has
been playing this deficit con game for
years, yet the chattering class in DC continues to portray the GOP as
the “serious” party when it comes to tackling deficits.

Ronald Reagan’s tax giveaways and
military spending created large deficits, yet in the eyes of the main stream
media, the GOP remained the “fiscally responsible” party. G. W. Bush
wasted his inherited budget surpluses on two wars, tax cuts for the wealthy,
and a prescription drug plan that wasn’t paid for.

The GOP was still was portrayed as
fiscally responsible.

In the Obama era, the Democrats have
ensured that the programs they enacted, like health care reform, are either budget
neutral or actually reduce the deficit and they have enacted policies to reduce
the cost of Medicare without cutting benefits.

Yet Democrats are still portrayed by
the press as less than fiscally responsible.

The headline is that the GOP was backed into a corner that they
can’t easily get out of, when last week, the Democrats finally called the GOP’s
bluff. In response, Messrs. Boehner, Kantor and McConnell have been all bluster
and no bacon, still trying to hew to their strategy. It doesn’t look like Mr.
Obama will play the same game with them as last time.

Late today Republicans
sent the White House a
counter-proposal,  offering $800 billion in revenue gains from
closing loopholes and a total of $2.2 trillion of overall deficit reduction. We’ll
see over the next few days if is truly worthy of consideration.

In England, their right wing equivalent
of the Republican Party has made good on its promises of spending cuts and
lower taxes. They have created the
policy nirvana that the US Republican Party seeks for us:

• Spending
  has been cut viciously, and taxes have been lowered for the rich
• Was
  the deficit reduced? No, it has increased
• Has
  business boomed now that they are brimming with confidence at the Government’s
  good sense? It has not

Their right wing has torpedoed the British economy with the very policies America’s Republican
Party wants us to embrace.

Time for the people to tell the
Republicans we have had enough of their con. There is no evidence to support their contention that lower taxes will
grow the economy or reduce income inequality.

What’s
Wrong Today:

Foreign Policy Magazine (FP), a subsidiary of the Washington
Post Company, is out with its list of the Top 100 Global Thinkers. The list is an
annual event at FP. Like all such lists it is easy to ridicule. Here is how FP
introduces its 2012 list:

The list
gets off to a good start, pairing Burma’s Aung
San Suu Kyi and Thein Sein, the once-jailed dissident and the longtime general
who runs the country, at #1, because they worked together to open up Burma to
limited transparency and freedom for most of its people. Overall, their top 15 Global
Thinkers list equals 23 people. But what qualifies someone as a “Global Thinker”?
What is the difference between a global thinker and a “Thought Leader”?

FP thinks
that America’s Republicans are vendors in the global marketplace of ideas. Rep.
Paul Ryan, R-WI (8th) joins Liz and Dick Cheney (tied for 38th)
and Rand Paul (71st) on the list.

FP
helpfully points out their reasoning for everyone on the list, including these
4, and the reasons are laugh out loud funny

• Rand Paul: “For telling America
  to come home.”
• Liz and Dick Cheney:”For keeping
  the neocon flame alive.”
• Paul Ryan: “For doubling down on
  the debt crisis.”

Whatever.

David
Rothkofp, CEO and Editor-at-Large of FP, wrote the following about the Thinkers
List for FP’s December issue:

So we have
the FP’s CEO dissing his own list. Maybe this is why as Esquire Magazine’s Charles Pierce says: “the basic problem with the
list, of course, is the basic problem with all of elite journalism, the search
for a spurious ‘balance’ instead of truth.”

It explains why Aung
San Suu Kyi (1st) can appear on the same list with Benjamin
Netanyahu and Ehud Barak (tied for 13th). Or how a writer like
Salman Rushdie (33rd) is equated with a charlatan like Charles
Murray (43rd).

There are some redeeming
placements on the list. Russia’s Pussy Riot is ranked 16th on the
list: “For shattering their glass cage with a love letter to freedom.”  That, like much of FP’s reasoning, sounds
craptastic, but read a little of this speech by Nadezhda Tolokonnikova at Pussy Riot’s trial:

They took on Vladimir
Putin and the Russian Federation in public and won the PR and thought
leadership battle, creating a global response. 
And Ai Wei Wei (26th), an artist and thought leader, beats
out Christine Lagarde (27th), who is an operative, not a thinker.

When you care more
about superstar politicians than thought leadership, you get committee-created crap like FP’s “Thinkers” list. No one considers
Paul Ryan and Rand Paul either global or thinkers; The Onion could do better.
If, for the sake of argument,
we accept Paul Ryan as a “thinker”, it boggles the mind to figure out
how he could be lauded as a “global” thinker. His entire intellectual
effort has been about establishing a Randian oligarchy in the US, while showing
virtually no interest in global affairs.

FP includes the
economist Nouriel Roubini (35th)
who called the housing bubble in 2005: To equate Roubini and Paul Ryan as “Thinkers,”
when Roubini has been right about almost everything about which Ryan has been
wrong, shows the inherent artlessness of the thinkers at FP Magazine.

Sad to think that a
respected journal like FP can sink their credibility with this kind of
star-chasing trash.

We desperately need
thought leaders, not self-promoting operatives. A few really strong intellects
with the ability to lead us to a better place could do the job.

Will the real “Global
Thinkers” please stand up?

As the
Wrongologist wrote after the
election, Mr. Obama’s election victory was the result of micro-targeting of undecideds and persuadable voters in the swing
states and then turning them out on election day.

The Obama
campaign used ‘microlistening” to make every vote
count. They parsed voters’ concerns in fine detail. These data were then
consolidated in the campaign’s Dreamcatcher database.

Then the data
was loaded into another campaign program, Narwhal, so that every fact gathered about a voter
was available to every arm of the campaign. This information-sharing
allowed the Obama For America (OFA) ground game to turn out people whom data-mining
had pinpointed as likely to be friendly to Mr. Obama’s views.

The election is
over, but Narwhal is alive and well, using the data and concepts developed in the campaign
to learn more about peoples’ opinions about
the Obama administration’s positions on the Fiscal Cliff negotiations and call
them to action.

So,
What’s Wrong?

They
should use Narwhal for two other purposes: First, to win a majority in the US
House of Representatives in 2014. Second, to make a conclusive case for
Obamacare.

Let’s start with the 2014
election: Mr. Obama’s legacy would be burnished by passing the remainder
of his legislative agenda, but that will require control of both houses of Congress.
Deploying Narwhal successfully could
be the key to doing that. This means a pick-up of 25 seats compared to
2012. Steve Israel,
head of Democratic Congressional Campaign Committee, will need Narwhal’s help to
pull that 25-seat rabbit out of the congressional hat.

But, as Politico
reports, history
is against Democrats getting a majority in the House in 2014. The party controlling the White
House during a president’s sixth year in office has lost seats in every midterm
election but one since 1918. The average loss in those elections was 30
seats.

Party
leaders say they are focusing on around 50 Republican seats in 2014,
particularly those in areas where Obama performed strongly in his two
elections. Israel has identified the four most vulnerable as Ohio Rep.-elect
David Joyce, Illinois Rep.-elect Rodney Davis, Florida Rep. Bill Young and
California Rep. Gary Miller. That
leaves 21 more for the Democrats to find.

Also according to Politico, there were 14 Democrats and 12
Republicans that won by razor-thin margins in 2012. The Wrongologist is only counting those
who won by less than 4.4% of the total vote. Given that most Congressional
Districts are relatively small; this translates into less than 3000 votes in
most cases. It is also very important for
Democrats to hold on to the 14 seats they won by 3000 votes or less, or
the job is much more daunting.

So, Narwhal for 2014!

Selling
Obamacare: Mr. Obama did not fare
particularly well with white working class voters, but they are going to be among the prime beneficiaries of Obamacare.
Recent polling shows the potential for tremendous gains for Democrats among
segments of the electorate who seem generally unaware of the value they stand to receive through Obamacare:

“78% of the uninsured
Americans who are likely to qualify for [medical insurance] subsidies were
unfamiliar with the new coverage options in a survey by Democratic polling firm
Lake Research Partners. That survey, [sponsored by the nonprofit Enroll America]
also found that 83% of those likely to qualify for the expansion of Medicaid,
which is expected to cover 12 million Americans, were unaware of the option.”

(Emphasis by the Wrongologist)

People know
about the Mandate in the ACA, which requires that people get health insurance. But people have no clue about how Obamacare makes health care insurance
affordable.

Enroll America, a nonpartisan 501(c)(3) organization
whose mission is to ensure that all Americans are enrolled in and retain health
coverage, ran
focus groups in Philadelphia in
mid-November, working exclusively with those who would probably qualify for
benefits. Looking to understand how
much public education will be needed, the researchers came back with a simple answer: a lot.

When asked about whether
they had heard about any ACA provisions that might make insurance more
affordable, not one of the 31 participants in the four groups answered yes.

It isn’t likely that people
in West Virginia or Arkansas are any more informed. Once they learn
the details, it may turn out that they
will like Obamacare despite hating the Mandate and/or the President.

Boone County, WV is 98.5% white and
22% of its residents live in poverty. The median household income in the county
is $25,669. In 2012, the Federal Poverty Level (FPL) is set
at $11,170 for a one-person household and rises by $3,960 for each additional
family member. So, the FPL for a
four-person family in 2012 is $23,050.  

It is
likely that that many families in Boone County are going to eligible for health
care subsidies in the highest range. Obamacare rules state that people and families earning up to 133% of
FPL will have to pay only 2% of their income toward the health insurance
premium.

This means that a family
of four who makes the median income of $25,669 will only have to pay 2% of their income ($513/annually) toward a $10,000 health insurance plan.  

While
Mr. Obama only received 33% of the vote in Boone County, the next Democratic presidential
candidate may have a great shot at
improving that number. This may
be true in white, rural counties all over America.

If a
poor family of four living in Appalachia can receive $9,500 a year to make sure they all have health insurance,
you have effectively
counter-programmed the pap they see on Fox News.

Narwhal could be a key to the
Democrat’s future in poor white America if it can solve this awareness problem. This challenge is in Narwhal’s
wheelhouse: You need people to enroll in Obamacare; they don’t know how or
don’t understand why they should enroll. You
locate them, contact them, figure out their motivation, explain to them, and
then they go and do it. 

That’s Narwhal. Narwhal got millions of folks to vote. Surely it
can be used to get millions of people who need health coverage to accept (mostly)
free health insurance.

At this moment when we are
desperately searching for a way to get things done in Congress, it is a necessity that Narwhal
is funded by Democrats.

What’s
Wrong Today:

What could be wrong
with our quest to increase fuel economy? It helps the environment and lowers
our cost of commuting, a big deal with high gas prices.

In
1993, the average new passenger car got 28.4 miles per gallon (MPG). The best-selling car got 18 MPG in the city and 27 on the highway.

In
2010, the average new car got 33.7 MPG, while the best-selling car got 22
(city) and 33 (highway) MPG.

The Economist carried this chart laying out our
success with gas economy:

According
to Michelle
Hirsch of The Fiscal Times, fuel
standards will rise to 34.1 MPG by 2017.
 

One
particularly interesting trend was highlighted in a recent study on
“Transportation and the New Generation” by the Frontier Group: From 2001 to 2009, the average annual number of vehicle miles traveled by young people
(16 to 34-year-olds) decreased from 10,300 miles to 7,900 miles per capita—a
drop of 23%. [PDF ]

Doug
Short of Advisor Perspectives prepared this
chart showing how miles driven
has
fallen from 3.04 trillion miles in 2008 to 2.94 trillion miles in 2012, less
than they drove in 2006. (The grey bars show periods of recession) 

 

So, What’s Wrong?

Unintended
consequences can accompany a good thing and that’s true with improved gas mileage. Just as cars
are growing more fuel-efficient, Americans are driving less. While better
fuel-efficiency is good news for Americans’ wallets and less driving good for
the country’s air, for our highways
and mass-transit systems, it is a burgeoning disaster.

Why?

Because we fund highway infrastructure mostly
from federal fuel tax revenue. Fuel taxes go into the Highway Trust Fund
(HTF), which was created in 1956 to finance highway construction nationally. Buy fewer gallons of fuel and the amount
available to fund improvements declines.

Fuel taxes
account for 22% of all highway funding and 17% of mass-transit funding
nationally (with the rest coming from state and local governments). The HTF spends
most of its funds on highway and bridge maintenance and construction, but in
1982, Congress created a Mass Transit account within the HTF.

The current
rate of 18.4¢ was established
in 1997. Today, 15.44¢ of every 18.4¢ of fuel-tax per gallon funds
highways, while 2.86¢ funds mass transit and 0.1¢ funds clean-up of leaking
underground storage tanks. The HTF also receives some revenue from taxes on
truck tires, diesel, and other driving-related sources, but most of its money comes from gas taxes.

But as the
trend in tax receipts has slowed, the HTF has suffered:

• Funds
  paid into the HTF fell by 14% from 2007 to 2010

• Between
  2008 and 2010 Congress transferred $34.5 billion in general revenues into the
  HTF, the first time it had ever received such an infusion

(To learn more about how the Highway Trust Fund operates,
read The Federal Excise Tax on
Gasoline and the Highway Trust Fund: A Short History by James M. Bickley here).

Higher
fuel economy standards starting in 2017 will cause gas tax revenues to decline
by 21% by 2040. Earlier this year the Congressional Budget Office forecast that
the HTF will be unable to fund highway maintenance by 2013. The CBO projects that
the HTF will pay $589 billion to states by 2022 and take in $422 billion during
the same period. The CBO lays out the options to fund the shortfall as:

• Raise
  the gas tax by 5¢

• Divert
  funds from the general fund to the HTF

• Cut
  infrastructure spending by 10%

Mr. Obama opposes
raising the gas tax, so it is probably a political impossibility. And with the Fiscal Slope and the deficit
fighting in Congress, that money will be difficult to find elsewhere. This
leaves us with CBO’s “cut infrastructure spending by 10%.

This isn’t just a federal problem. Around 50% of all
surface-transportation funding and 20% of mass-transit funding comes from the
states, most of which face budgetary
woes of their own.

Repairing
America’s transportation infrastructure cannot afford to wait. The American
Society of Civil Engineers (ASCE) estimated in 2009 that 36% of America’s major
urban highways are congested, costing
$78.2 billion each year in wasted time and fuel costs. They also say
that our roads rate a “D” on their infrastructure
report card. They estimate the 5
year need for funding to be $930 billion 
 and estimate that spending for
the same period will be $380.5 billion.

We all
experience poor roads and road repair projects that take years to complete.
Fortunately, few of us experience the catastrophic failure of a bridge during
rush hour, but most of us know about delays at a bridge toll.

On our
roads, we get to experience the
leading edge of our nation’s decline to third-world status every day.

We can’t
let political inaction push us toward the CBO’s cut our infrastructure expense
option. Congress and the people need
to make highway infrastructure a priority.

You can’t grow the economy and get down to
business if you can’t get there from here.

Build it
and they will come.

 

 

 

What’s Wrong Today:

More
Thanksgiving holiday reading in the Wall
Street Journal brought this unhappy
report:

“The darkest
pages of Afghan history are reserved for a traitorous king named Shah Shuja.
Enthroned by British invaders in 1839, he was ignominiously slaughtered once
the routed infidels left.

President Hamid Karzai knows this story well.
He hails from the same Pashtun sub-clan as the reviled 19th-century monarch.”

The WSJ goes on to report that the
Taliban in their leaflets, poems and
songs mock Mr. Karzai as the
modern-day Shuja, a ruler imposed by outsiders and destined to meet an
unhappy end:

“Mr. Karzai
understands that his future survival depends on proving that he is no puppet of
the Western unbelievers—no matter
how much he actually depends on their money and troops.”

This contradiction has crippled our
Counter-insurgency program (COIN) and President Obama’s surge in the Afghan war, America’s longest foreign conflict. If the
Pentagon and the White House knew about this and still went forward with both programs, the Petraeus
resignation needs to be just the first of many. 

Karzai’s
concern for his neck means we will see no progress on the ground and continuing
rifts with him as we move to bring our troops home in two years.

Had You
Heard This?

Mr. Karzai’s
deep ambivalence was visible to our military commanders during a visit to
Kandahar (the Taliban’s hometown)
in 2010. They had flown him to a meeting with elders, where Mr. Karzai was to
kick off the military offensive that
was to be the centerpiece of Mr. Obama’s troop surge. From the WSJ:

“Instead, as
stunned generals looked on, Mr. Karzai called the Taliban ‘brothers’ and told the turbaned elders that
the war wouldn’t end as long as he was seen as a ‘foreign stooge.’ He then asked the elders whether
they wanted the offensive to begin. Hearing shouts of ‘no,’ Mr. Karzai ordered a halt to the
long-planned operation to clear Afghanistan’s second-largest city.”

So, we revised our Kandahar campaign to conform to Mr. Karzai’s demands. The
military abandoned plans to ring the city with Baghdad-style checkpoints,
biometric control posts and walls to filter out insurgents, measures that Mr.
Karzai, a Kandahar native himself, thought would erode support for his
government.

If we knew this in 2010, WHY have we persisted
with the charade?

Today, the
Taliban remains a very potent force in Kandahar, carrying out assassinations
almost every week. It has never been a secure city for coalition forces. They
are powerful even at the gates of Kabul. They are active today in provinces
where they were not in 2001.

So, What’s Wrong?

We are in negotiations with Mr. Karzai on the shape of our post-2014
military presence and this disconnect has never been clearer: As the New
York Times stated:

“The planning for a
post-2014 mission has emerged as an early test for President Obama in his new
term as he tries to flesh out the strategy for transferring the responsibility
for security to the Afghans. But it is not the only challenge: After the White
House decides what sort of military presence to propose to the Afghan government
for after 2014, it must turn to the question of how quickly to reduce its troop
force before then.”

Let’s add that how we deal
with an increasingly nervous and assertive Mr. Karzai is likely to be one of Mr. Obama’s biggest
2nd term foreign-policy headaches.

It looks
like when we leave in 2014, an
undefeated Taliban insurgency will remain, along with a dysfunctional
government that is mired in corruption and is utterly dependent on
foreign aid. The Taliban, for their
part, have warned that whoever allows US bases to remain in the country will “go
down in history as a traitor and slave.”

Umm, wouldn’t
that be Mr. Karzai?
And given his ambivalence, doesn’t he own a large piece of the responsibility
for our failure to achieve many of
America’s war objectives in Afghanistan?

Mr. Karzai
has been able to do whatever he wants in his spat with Washington: This year he
forced the US to stop unilateral Special Operations night raids; he insisted on
taking custody of hundreds of insurgent suspects held by the US at the Baghran
airfield. He then released many of them in a failed effort to convince the
Taliban to open peace talks. He disbanded Western-backed private security firms
and removed cabinet ministers and provincial governors that he suspected of
being too close to the US.

In recent
weeks, Mr. Karzai ordered the ouster of international representatives from the
country’s elections watchdog agency. He
has suggested that Afghanistan may deny US troops immunity from local law after
2014, the deal-breaker in similar talks in Iraq. He has threatened to
turn to China and Russia as alternative military allies. He has intensified his
criticism of NATO forces, regularly issuing statements that condemn the US for
causing civilian casualties.

Apparently, Washington views this as just
Karzai being Karzai. But, maybe
not: The WSJ reports that Mr. Karzai
also remains suspicious of the second leg of the American war plan: The
creation of a 352,000-member Afghan army and police force. Unlike his security ministers, who eagerly backed the
American-funded ramp-up and the gravy train that came with it, Mr.
Karzai felt that a large force perpetuates Kabul’s dependence on foreigners and exposes him to the possibility of a
coup. Mr. Karzai said in an interview with the Journal:

“I don’t believe in a big army. I never
believed in a big army… I believe
in an army that is…apolitical
and one paid for by the Afghan taxpayers’ money.”

Mr. Karzai
could be overplaying his hand. It is a vicious cycle: Karzai’s statements fuel the temptation simply to
walk away from Afghanistan. Given the
Taliban’s view of
Mr. Karzai, he probably will not survive 2014 if he remains in Afghanistan. So,
his remarks calling for a diminished American role fall into the category of “Be careful of what you wish for.”

What’s Next?

Karzai’s intransigence colors our internal debate
about whether to keep US forces in Afghanistan after 2014.

A valid
issue for both sides to consider was asked by Karzai’s Chief of Staff, Mr. Khurram:

“If 150,000 foreign troops haven’t been
successful here so far, how could 10,000, 20,000 or 30,000 that would stay
inside their bases after 2014 achieve any success?”

Indeed. Why
are we staying there a day longer than today? According to Anthony Cordesman of
the Center
for Strategic and International Studies, we will spend a total of $198.2
billion in Afghanistan in FY 2012 and FY 2013. He goes on to say:

“This is an
incredible amount of money to have spent with so few controls, so few plans, so
little auditing, and almost no credible measures of effectiveness.”

That money would
be much better spent helping to repair the damage from the Superstorm Sandy, rebuilding
our bridges and highways or paying our veterans the benefits they deserve.

Our troops
in Afghanistan are being injured and are dying under an ill-conceived strategy by a succession of Generals and a Commander-in-Chief
who ignored Karzai’s
motivations on the ground. We are propping up Mr. Karzai, who
apparently doesn’t share our basic goals for his country!

Our troops face the prospect of coming home understanding that we have accomplished
nothing for the blood we have shed and the US treasure that has been wasted.

Vietnam,
Iraq and now, Afghanistan. We want the Hollywood ending, because Washington writes the screenplay and we buy
the tickets.

What
continues to amaze is that we always
pick a “go to guy” like Diem, Saddam, Karzai or any other of the 50+
handpicked tin horns over the years.

We then
expect them to earn the trust of their people and deliver them to play a role in our movie, that of the grateful locals. 

Then comes
the failure and the lack of reckoning for it.

Oh and our
continuing failure to understand the limits of our supposed Exceptionalism…

Look at how shabbily we have used our soldiers
and how great is their sacrifice!

 

What’s
Wrong Today:

Sorry for
the radio silence, the Wrongologist was fighting a turkey-induced coma.

A holiday
story caught our eye. The Wall Street Journal reported
that work is the last thing that people
are thankful for:

“The workplace
ranks dead last among the places people express gratitude, from homes and
neighborhoods to places of worship. Only 10% of adults say thanks to a
colleague every day, and just 7% express gratitude daily to a boss, according
to a survey this year of 2,007 people for the John Templeton Foundation of West
Conshohocken, Pa., a nonprofit organization that sponsors research on
creativity, gratitude, freedom and other topics…

A common attitude
from the corner office is ‘We thank people around here: It’s called a paycheck,’
says Bob Nelson, an employee-motivation consultant in San Diego…”

Research suggests that employees who feel
appreciated are more productive and loyal. But some bosses are afraid employees
will take advantage of them if they heap on the gratitude.

More than
half of human-resources managers say showing appreciation for workers cuts
turnover, and 49% believe it increases profit, according to a study of 815 managers
released last week by the Society for Human Resource Management (SHRM). Employers
are placing less importance on recognition programs. Although 77% of companies
still have them, according to the SHRM study, surveys in the past six years show a gradual decline in
total offerings and employer cutbacks in existing programs.

So, What’s
Wrong?

Generally,
work life in America has gone downhill. This isn’t about the millions who can’t find a job or stagnant wages. It’s
about those who are still working, where it’s anything goes at work, including bullying, abuse and violence. Any business or institution that is serious about protecting their employees from all forms of violence and abuse ought to consider implementing some form of workplace violence prevention strategy.

All of this shows just
another facet of the coarsening of
civility in America.
And spare us the
“they should be thankful that they get a paycheck” argument. If
people work only for a paycheck, they’ll only work hard enough to keep from
getting fired.

Bullying in the workplace
is common. A 2012
CareerBuilder survey showed 35% of all employees directly experienced
workplace bullying, up from 27% last year. 16% of these workers reported they
suffered health-related problems as a result of bullying and 17% decided to
quit their jobs to escape the situation.

Of workers who felt
bullied, 48% pointed to incidents with their bosses, while 45% said coworkers and
26% mentioned someone higher up in the company other than their boss (respondents could list more than one choice).

54% of
those bullied said they were bullied by someone older than they are, while 29%
said the bully was younger.

The Workplace Bullying
Institute tries to raise awareness of abuse in the workplace as well as
lobbying states to pass worker protections legislation. So far, thirteen states
have laws on the books to prevent abuse in the workplace. Yet lawsuits are
thrown out by the courts and the message clearly is offenders in the workplace
can get completely away
with it.

In
a case cited by David
Yamada, a professor and founding director of the New Workplace Institute at
Boston’s Suffolk University Law School, a physician in Arkansas abused an
employee for two years, called her a “slut,” and told her repeatedly that women
who work outside the home are “whores and prostitutes.” Making matters worse,
he threatened to kill her if she quit. In its decision, an Arkansas court ruled
that even if the allegations were true, they still didn’t add up to intentional
affliction of emotional stress. While the case dates from 1996, this type of
mistreatment is still common today particularly in the health care industry.

Workplace abuse costs money and is the #1 reason people look for new jobs.

Finally, workplace violence is the 4th leading cause
of death at the workplace and the
leading cause of workplace death for women.

The
documentary, Murder by
Proxy, is a documentary that describes a failed attempt to get a workplace anti-bullying law passed in the
State of Washington. It shows a description of workplace mass murder
and the conditions of the work environment before the tragedies happened.

These studies, the film and the WSJ article offer food
for thought on how the workplace in
this country is turning into a nightmare, particularly for the young and for those at the
bottom of the pyramid.  

Nothing’s
Wrong Today:

Sometime in the next few days, The
Wrongologist Blog will pass twenty five thousand hits.

The Wrongologist has been blogging for
about 18 months and if you had said at the start that the blog would reach 25K
hits, he would have been amazed.

It’s a small blog, with a small readership. There
are blogs that get a million hits per day. That isn’t the Wrongologist blog.

The Wrongologist is not doing this to make money,
but because he is an opinionated person. He could add advertising, but thinks
that it draws attention away from the hard work of reading the words.

The Wrongologist is now going to step
out of speaking in the third person and speak from the heart:

This blog is an extension of my education about politics,
economics and American history, my experience in the business world and my antipathy for dissembling, mendacious
politicians. I lean to the left of center politically, but I work hard
to be an equal opportunity scold. I poke holes in the positions of doctrinaire
politicians who would rather tell us the talking points (once again) than to
tell the truth or explain clearly the logical result of the policy decisions
they support.

That will always be wrong in my book.

I have heard from some that the blog
is not always an easy read and
that some posts may be too long for many of today’s attention spans. I try to
distill complex issues to as near to their essence as I can, but we live in a complicated
world where the details of policy and politics really matter.

I hope that many more of you will begin to leave comments. They help me and they also help the
other readers understand the issues at hand.   

I’ve learned a ton since I started writing the blog in March,
2011 and hopefully, some of you have learned a few things as well. Researching
issues that I address takes time and I try hard to be
accurate in what I post. If you have
detected errors, I apologize for that.

Anyway, nearing 25,000 hits seems like a good time to take a
moment and give thanks to those who follow the Wrongologist blog. I really
appreciate it. If you enjoy the Wrongologist, please tell a friend about it.

I’d like to recognize Monty, Fred and
David for their early and continuing support of the blog.

Please give to your local food bank.

Happy Thanksgiving to all…and you’re welcome!