The Sun Isn’t Rising This holiday season, Christmas tree sales pop up in the same old familiar places, kids sit on Santa’s lap and cars cruise the 34th Street lights in Hampden. On the surface, the holiday season seems the same as always. But like a stealthy virus, the economic destruction wrought by the collapse of the mortgage market keeps spreading.

The latest casualty in the ongoing parade of disasters is the Chapter 11 bankruptcy filing by The Baltimore Sun’s parent, The Tribune Companies. Despite what their management would have you believe, this isn’t just a function of tough economic times. In the case of industries like newspapers and big auto, we are witnessing the final death throes of the 20th century industrial economic models.

The writing has been on the wall for a long time for the auto makers who dug their own economic grave with years of mismanagement and myopic thinking. The pan handling Big Three will get their $15 billion bridge loan from Congress that will keep them alive until the spring when another massive infusion of cash is going to be needed. Meanwhile, consumers, at least those that can afford cars, will continue to buy Toyotas and Hondas because they get more value for their dollar. The creation of a “car czar” by Congress is supposed to put them on the right track. But a government that still can’t get education right is unlikely to be able to fix the Big Three’s problems.

The sick economy is hastening what was an inevitable failure of fundamentally bad business models. Leverage might be to blame today, but big conglomerates like the Tribune are getting hammered because they haven’t been nimble enough to adjust to consumer tastes or come up with products that people want.

A case in point is The Sun. Every morning as I walk my dog, I toss my neighbor’s Sun paper on her porch. The lack of weight in the paper reflects not just the decline in the number of pages printed, but a lack of content that is worth reading.

Then I go back inside and turn on my computer to get the day’s news.

I am not alone; the decline in newspaper readership mirrors the increased use of the internet. People don’t have to, nor do they want to rely on just one source for their news. Why buy The Sun when you can read news and commentary from a range of online “papers” for free, choose which articles to read and get it all done in the same time it took you to read one newspaper?

The Sun spent a lot of money and time re-designing its paper ostensibly to make it more appealing to readers. Their money would have been better spent up-grading their website, which frankly stinks. It isn’t user friendly. Articles that are days old are listed with current news presumably to make up for the sparse content. With better news sites, from the traditional papers like The Times and new comers like The Huffington Post and digests like citybizlist, there isn’t any reason to read The Sun for national, international and business news. If it’s sports you crave, you can even read about the Ravens and Orioles in the Post, which sometimes has more insightful coverage anyhow. (One bright exception is business columnist Jay Hancock of The Sun who has been singularly outstanding.)

The decline in circulation for daily papers like The Sun may not be reversible. Today, people have too many choices and can mix and match news from a variety of sources to fit their interests.

Oblivious to the obvious, investors led by Ted Venetoulis have indicated an interest in purchasing The Sun. Local ownership may have appeal for some Baltimoreans, but today’s consumer isn’t sentimental when it comes to spending money, especially when the alternatives are mostly free.

Like the murder news it reports on its front pages far too frequently, The Sun will, before too long, be reporting its own death as a daily print newspaper.  4:19 PM •  3 Comments • Links to this post

Bad News Rising The cascade of bad economic news has affected Maryland companies like Constellation Energy which was saved by Warren Buffet’s bailout, and Legg Mason which got skewered by portfolio losses of former investment rock star Bill Miller.

Though most of the attention is on big company problems, there is little doubt that small businesses are struggling and trying to survive with far less financial resources than the big companies.

Sometimes downsizing in response to an economic downturn can help a company survive; but if sales aren’t there, no amount of restructuring will help. This is the dilemma faced by the Big 3 auto companies that are seeking government assistance, but don’t expect any small companies to get any government sympathy. Small business may be the backbone of America’s economy, but they are at the end of the line when it comes to bailouts.

People aren’t spending, but the lack of capital is also a problem for businesses that might be seeking solutions to save themselves, like merging with other companies. One consequence of bank mergers and now failures is that lending is concentrated in fewer institutions. If a bank gets into trouble, its customers have fewer choices and competition is affected. Banks can afford to be tougher and they are more than ever. Lending institutions made bad decisions but that can’t stop them from taking risks on making loans to deserving companies. Until they do that, any economic recovery will be stalled.

If private companies are suffering from a lack of capital, so is government. The O’Malley administration was forced to cut $200 million from its budget because of lower tax revenue; and transportation projects have been put on hold because gas tax receipts are down too. Eliminating vacant positions may reduce the budget, but it won’t reduce actual expenses which the government is going to need to do. The budget pressures provide an opportunity for state and local governments to examine the costs of the services that they provide and whether it can be done more efficiently. Each time there is a budget crisis in Maryland, money is shifted from accounts to cover shortfalls, or temporary solutions like furloughing state employees are used. But this time the revenue shortfalls may last longer and government will need to make more fundamental adjustments. It is going to take creative thinking to make revenues stretch – some services will have to be eliminated or projects delayed; but the opportunity for longer term re-structuring shouldn’t be missed.

The new Obama administration will be providing states with billions of dollars for infrastructure projects. Maryland, with its strong congressional delegation should get at least its fair share for bridges and highway projects. This will help employment in the region, but one project that won’t help soon enough is Baltimore City’s Redline light rail project which has been in planning for six years and at the soonest, would not be operational until 2012! This would be nine years after the planning started – is it too trite to say that we put men on the moon faster? Now, a recent article in the Sun points out continuing community objections to the route may further delay construction, if not kill the project altogether.

The New Year is likely to deepen the economic pain most of us are feeling. But the economic cold winter that we face shouldn’t freeze actions that need to be taken to reposition our local economy for the future growth that we all expect. The opposite should happen; the Red Line needs to be built, and the sooner the better. Federal money is going to be made available next year, and there is no time to waste in getting it.  12:27 PM •  2 Comments • Links to this post