Bengur's Blog: Osman "Oz" Bengur on Business and Politics

Cardin and the Crazies

noreply@blogger.com (citybizlist) — Wed, 12 Aug 2009 15:59:00 +0000

So much for rational debate.

According to the Baltimore Sun’s report of Senator Ben Cardin’s Town Hall meeting earlier this week, former GOP gubernatorial candidate Ellen Sauerbray wore a pin that said “Euthanasia”. The assumption behind her message is that the healthcare bill supports euthanasia when it provides funds for end of life counseling – a view that even the Republican sponsor of this provision in the Senate described as “nutty”.

But she could just as easily have been referring to Ben Cardin’s Town Hall meeting and the rude protests that greeted the Senator and killed any possibility of rational debate, which is a shame.

There are legitimate concerns - and I share them - about the various healthcare proposals being hashed out in Washington. But you wouldn’t know it from the nonsense spewed at these town “mauls” as they have been referred to. The antics of the protesters which have become a daily occurrence this August are beyond tiresome and ultimately stifle citizen input that is necessary.

And let’s not dignify these protestors by saying these are just passionate folks worried about losing their healthcare and exercising their rights as citizens. These groups have more in common with the angry mobs that stood at the steps of school houses in the south trying to prevent desegregation than the patriots who dumped tea into Boston Harbor. At best, they act like four-year-olds having a temper tantrum.

The hysteria is often generated by misinformation from politicians and talk show bloviators who should know better - like Sarah Palin who wrote recently that the Obama reforms will create “death panels” that supposedly will make end of life decisions for you and your loved ones.

The fear they generate with this nonsense is misplaced.

What they really ought to fear is the fact that the cost explosion in healthcare is the biggest threat we all face. It is bankrupting Medicare and is a huge financial burden on businesses and individuals. They should worry that the United States spends far more on healthcare than other western countries that provide better if not complete access to health care for their citizens, with no better health outcomes.

The more the protestors shout down diligent moderate senators like Ben Cardin, the more they undermine the airing of legitimate concerns about where the healthcare legislation in Congress is heading.

And there are a lot of concerns about whether the various plans will go far enough to control costs; and whether in the goal to create universal coverage, they may place additional cost burdens on small business struggling in this economy.

But despite the craziness of the town hall protestors, the element of mistrust they express towards Congress and their lobbyist benefactors shouldn’t be ignored. The push for healthcare reform highlights the need to reform how Congress does business.

And, not surprisingly it is business as usual on Capitol Hill. Insurance and drug companies are actively lobbying Congress and giving generously. As Frank Rick wrote in this past Sunday’s New York Times, industry groups contributed $1.8 million over the first six months of 2009 to 18 House members of both parties directing health care reforms, including Speaker Nancy Pelosi and Maryland’s Steny Hoyer.

The insiders tell us this is how the “system” works, but most of us are sick of it. The whiff of corruption creates a legitimate sense that the people are going to get screwed in the process.

If this sense becomes pervasive – from liberals that the plan doesn’t go far enough in taking on the insurance and drug companies and from the right that the government is going to control your lives – then the various healthcare plans being debated in Congress are heading for intensive care.

The healthcare system is immensely complex and confusing to everyone. The stakes to individuals and to our economy are huge. There are tough choices that need to be made, and sacrifices that are going to be required. But unless everyone feels that the sacrifice is both necessary and the burden evenly distributed, the euthanasia Ellen Sauerbray fears may be applied to healthcare reform.

That would not only be a shame, it may be a disaster for the long-term fiscal and medical health of our country.

NEA, Michael Steele and a Good Idea

noreply@blogger.com (citybizlist) — Tue, 09 Jun 2009 16:29:00 +0000

What do they have in common? It isn’t obvious, but bear with me as I try to weave this rather tenuous thread.

Yesterday, citybizlist.com published the letter from New Enterprise Associates (NEA) counsel Louis Citron informing Mayor Dixon that NEA was leaving the city for an office in the suburbs, and taking the $200,000 in revenue that it generates for local merchants (oh dear, like the Maryland Club!) with it.

The letter cited the increase in crime in the neighborhood. There is no doubt that this is a legitimate concern for all who live in the Mt. Vernon area which has seen crime spill over into this relatively peaceful neighborhood.

Was it just me, or did the tone of the letter make me wonder what NEA’s real motive is? Could it be that they wanted to consolidate operations in one office – after all, the St. Paul Street office is small and housed only 35 employees. That it would want to consolidate its operations in the area would be understandable for one of the largest private equity funds in the world with $8.5 billion in capital.

That they had to write a public letter to the Mayor struck me as disingenuous and grandstanding. If they were so concerned about the crime problem, they could have spoken to the Mayor about it in advance. According to the Mayor’s office, they didn’t. As a very wealthy fund, NEA could easily afford private security guards to escort its employees to their cars. The NEA partners obviously felt that it is government’s obligation to provide for the public safety. And it is. But as businessmen, they also know that the city is strapped financially and that police resources are stretched. If NEA had wanted to stay in the City, they could have kept their employees safe and their fancy cars too.

It could be that they just didn’t want to spend the money. After all, the private equity industry is facing the now certain prospect that the Congress will tax the “carried interest” portion of their compensation as ordinary income, and not as capital gains. The argument that capital gains treatment is justified because of the risk that equity funds take has lost currency with a Congress looking for revenue and wise to the fact that very little of equity partners’ capital is actually at risk. And as Warren Buffet has said, there is something wrong with a tax system where the income of the secretaries is taxed at a higher rate than the income of the equity firm’s partners.

Speaking of politics, the Republicans’ Senate and House campaign committees had a big fundraiser in DC last night and a friend of mine gave me a few little anecdotes from the evening. She noted that Michael Steele, the GOP Committee Chair was nowhere to be seen and didn’t even merit a mention from the parade of speakers on the podium. This seems pretty strange for a party that desperately needs to show some diversity. The evening was mostly a lackluster affair; the GOP is still apparently in shock at their diminished influence in Washington, and in awe at how Obama is hogging the limelight.

It was so bad that video introduction to Master of Ceremonies Jon Voight included a scene from the movie Pearl Harbor where Voight plays President (and democratic icon) FDR. In the scene, the paralyzed president struggles to his feet to angrily exclaim “don’t tell me it can’t be done”. The tepid applause from the republican crowd of 2,000 reflected, I think, their confusion at whether they should be applauding a democratic president’s defiant statement, or his portrayal by one of the party’s most conservative spokesmen. That confusion shows, well, how confused the GOP is.

The feckless GOP is left to hope that Obama (and the country) falls flat on its face. But in Maryland, the GOP has become so irrelevant that won’t be enough to save them.

So, here’s the idea. The June 6th Economist magazine has an article about Washington State’s system of holding non-partisan primaries which allows independents, Democrats and Republicans to vote on the same ballot. The top two vote getters in the primary, which could be of the same party, then have run-off in the general election. The effect of this is to enfranchise a large number of voters, particularly independents who are barred in Maryland from voting in primaries, and less polarization as the process leads to the election of moderate candidates. This might save the GOP in Maryland from self-destruction.

Such a system will never got adopted in Maryland because the Democrats know they would be giving up power.

But that is probably the best argument for it.

Purchase The Preakness

noreply@blogger.com (citybizlist) — Wed, 22 Apr 2009 15:07:00 +0000

Spring, among other things, is the start of horse racing season. I am not a horse racing buff. I have only been to the Preakness once, though I have been to various tracks and always manage to watch the Kentucky Derby and the Preakness on television.

There is something about horse racing that captures the imagination. It is the combination of watching exquisite animals and the excitement of sport at its most basic level. A coach of mine once said racing is true sport, the rest are just games. Racing is competition in its purest form – the winner is the one that gets to the finish line first. There are no referees or umpires to affect the outcome; and no coaches that can make a difference in the last minute with a key time out or play calling. As an athlete, you have no teammates you cannot rely on.

The Preakness was a Baltimore and Maryland state treasure long before the Orioles and Ravens came along. But unlike those two teams which have beautiful stadiums to play in, Pimlico is a dump. It needs to go, but The Preakness must be preserved.

With Magna Entertainment, the owner of Pimlico, filing for Chapter 11, the Governor quickly secured passage of a bill giving the state eminent domain over The Preakness Stakes.

It now needs to take the next step. As important a symbol as The Preakness is to Baltimore and Maryland, the state should exercise eminent domain right away and take over operation of the track and The Preakness.

But the state shouldn’t stop there – it should build a new track downtown, near Camden Yards and near the Middle Branch and move the Preakness there.

Like Oriole Park, a state of the art facility could be built that is elegant and a pleasant place to be on a warm spring afternoon or summer’s night. Like the ball park, it could evoke the history of racing in Maryland. It could borrow from Saratoga with its pastoral feel and mimic Churchill Downs’ grandeur. It could be built to make smaller crowds enjoy the intimacy and the excitement of being close to the horses yet accommodate the large crowds that will come for the Preakness every year. Slots, which have had a hard time attracting interest from private investors, could be located there too. With Oriole Park and Ravens (does anyone really call it M & T Bank?) stadium, the new track would become the third jewel in Baltimore’s sporting crown.

Those in favor of a free market that keeps government out to the hands of private enterprise will yowl. Plus, they will say that horse racing is a dying sport and a certified money loser (all true).

Parents and community activists will say that the money spent on a new track would be better spent on schools (I don’t disagree).

But Camden Yards and the Ravens stadium are much more than places to watch games. They are symbols of a revitalized Baltimore and a source of pride to the community. And not insignificantly, they provide a lot of jobs in relation to the tourism and hospitality industry. It was Mayor and Governor Schaefer's vision that created those facilities. It is time to use that same boldness to save The Preakness by building a new facility.

A new track would fit that mold of public works projects that add to the City’s ambience and image. It would enhance the appeal of The Preakness which is losing its luster because Pimlico has become so seedy. And what of Pimlico? Tear it down and sell it to a developer for some other use that is more in keeping with the community where it is located.

My bet is that a new track will rekindle interest and excitement in horse racing. Where will the money come from you ask? The Preakness is a brand that has tremendous value. With that asset, we can figure it out.

Maryland's Ugly Earmarks

noreply@blogger.com (citybizlist) — Tue, 14 Apr 2009 17:13:00 +0000

The Maryland General Assembly just ended its annual session facing the prospect of having to address another $1 billion budget gap without the benefit of the $3 billion federal stimulus that helped it to avoid more drastic cuts.

Meanwhile, in the parallel universe of the U.S. Congress, the Baltimore Sun reports that Maryland’s Congressional Delegation has requested more than $1 billion “earmarks” funding for special projects in the state.

Maryland’s state lawmakers’ spending is held in check by the requirement to balance the state’s budget. Not so our folks in Washington. From the list of earmarks, it looks like some of the state’s members of congress have never met a program that they don’t think deserving.

Bringing money home to their districts is what congressmen do and it makes them friends. This can be a good thing especially in hard times when state funding isn’t available for otherwise deserving projects. There is something for everyone in these earmarks requests: those for the elderly, kids and education are mostly ok. But how do you justify $500,000 for the Cal Ripken Foundation for programs for disadvantaged youth? I don’t question that programs like this aren’t worthy, but should federal money be used to fund Cal Ripken’s foundation programs? No. Cal should ask his wealthy friends to support his programs, not the taxpayer.

But private companies and federal agencies? Not ok.

Many of the projects listed in Maryland’s congressional wish list have to do with military and national security projects. There is no doubt this is an important industry in our state. But you have to ask if they are so important, why they weren’t funded from the defense budget or other agencies with responsibility for these areas? The Sun article cited an appropriation request for a $60 million Cray computer for the National Security Agency. I don’t question that the NSA needs a Cray computer. But the NSA’s request was probably knocked out of the budget process because the Obama administration had higher spending priorities. So the NSA went to their congressman for an earmark to get around that.

At least the congressman making that request, Dutch Ruppersberger, sits on the House Select Committee on Intelligence so just maybe he knows something that Intelligence Chief Leon Panetta doesn’t. But what of John Sarbanes' $6.5 million earmark to a Columbia defense contractor for a “Seacatcher UAS Launch and Recovery System”. Maybe this is a good program and maybe it isn’t, but I am not sure that Sarbanes is in a position to know because he doesn’t sit on any committees that deal with military matters. Defense Secretary Gates just announced cuts to wasteful military programs. If the Seacatcher were a priority for the Defense Department I expect it would have been included in the department’s appropriation request.

I am all for federal spending in Maryland. Better the money come to Maryland than go to Montana. And, I am not picking on any of these congressmen in particular. Unfortunately, this is the way the game is played. As long as they can do it, they will.

But accepting business as usual got us where we are today. President Obama opposes earmarks as part of the Washington insider culture that needs to be changed (full disclosure: I did too when I ran for congress). Why? Plain and simple: there is too much temptation for favoritism, and there is too little oversight and accountability. Earmarks circumvent the appropriations process, and that’s the point.

As Congress plays with its earmarks, they should consider that maybe there isn’t a whole lot of difference between earmarks and the indiscriminate loans made by the financiers that got us into the current financial mess. The regulatory system failed the public and we are all paying for the consequences. The earmark addiction represents an abdication of the legislative process in favor of, well, favoritism.

In his inaugural address, the President said it was time for government to put aside childish things. The Gates defense budget shows that his administration is willing to make tough choices.

But it’s obvious that Congress can’t, and won’t give up its earmark toys. It’s going to be up to President Obama to take them away.

The Incredible Fecklessness of Being Republican

noreply@blogger.com (citybizlist) — Thu, 12 Mar 2009 13:26:00 +0000

I shouldn’t listen to talk shows, especially by conservative Republicans.

With a national economic crisis created under a Republican’s watch, Rush Limbaugh’s answer is to bash President Obama and ridicule the GOP’s new leader Michael Steele. At home, it is Bob and Kendell Erhlich whining about Martin O’Malley on their Saturday radio show in Baltimore.

Is it any wonder that the Republican Party has such little support?

To be fair, there are some serious commentators out there – Ron Smith at least strives to provide an intellectual basis for his arguments.

The rest, from Limbaugh to the Erhlichs just want to rant. They keep reciting the same old arguments and mistake the noise from the echo chamber as wide support for their positions. But their arguments are tired and old.

What do they rant about? Big government! Wake up! We have had big government since the days that Lyndon Johnson was President. And since LBJ, we have had Republican presidents 28 of the past 40 years.

A remarkable fact is that since Johnson, every democratic president has increased revenue faster than spending while the opposite has been true with the five Republican presidents increasing spending faster than revenue since that time.

With that kind of track record, they should like what Obama is doing.

We face an economic crisis of monumental proportions. Yet all the Grand Old Party can do is come up with the same old nonsense. John Boehner, the GOP leader in the House of Representatives answer to the crisis is to reduce spending. Even conservative economists say the economic crisis warrants increased government spending. Is it any wonder few take them seriously?

There are legitimate criticisms to be made about President Obama’s budget and spending plans. But most of those arguments are coming from democrats like Paul Krugman who think we need even more spending, and Tom Friedman who thinks the money we are spending should go into new tech industries and not to prop up the auto companies which are dying.

Today’s GOP is mostly bereft of new ideas.

If the national party is unserious, then the state’s GOP has become, or more accurately, has gone back to being irrelevant. Bob Ehrlich had a chance to make a mark as Governor but he was more interested in lecturing the legislature than offering serious legislation. He had no notable successes much less good ideas compared to, for example, Republican Governor Mitt Romney’s health care for all program in Massachusetts.

It is too bad. Maryland would benefit from a Republican party that offered up good government policies beyond cutting taxes and cutting programs. The party has been hostage to its right wing since Ellen Sauerbrey beat Helen Bentley in the 1994 GOP gubernatorial primary. The most recent example of the republican right eating its own occurred last year when Congressman Gilchrest was beaten by State Senator Andy Harris. At the national level, Steele’s capitulation to Limbaugh was in this tradition.

The party should focus on new ideas to improve services that are delivered in the state. Meaningful progress on improving schools in poor areas still eludes us. Individuals and businesses struggle with ever escalating health care costs. This state has a woefully inadequate public transport system. It takes too long to get things done – Baltimore's Red Line is a case in point. They could find ways to streamline government and improve services.

They are also going to need a leader who is willing to take on the party’s ossified old guard. That is no small task given how nasty they have been, especially with their own.

The party has become too comfortable with complaining. It has become morally rigid and intellectually lazy. It is, after all, far easier to rant than to do the hard and serious work of coming up with new ideas.

But if they don’t, they will deserve a new name – the Feckless Old Party.

The Wreckage in Constellation’s Orbit

noreply@blogger.com (citybizlist) — Fri, 27 Feb 2009 01:37:00 +0000

The ever unfolding financial disaster is like the US and Russian satellites that recently collided in outer space. Their wreckage is expected to orbit the earth for thousands of years, posing a hazard to other satellites that we have come to rely on.

Like the detritus from these satellites, the current financial wreckage is going to cause long term damage to the economy. As if the short term hasn't been bad enough.

One of Baltimore’s most prominent companies, Constellation Energy narrowly avoided disaster but still gets most of the heat from the press. The press loves it because it’s a story that combines all key attributes of an exciting drama: a stodgy business is turned into a high flying company by a charismatic youthful king with a sexy cheerleader wife. The company narrowly avoids disaster when it is rescued by a famous financial knight. But the knight wants control of the kingdom so the youthful king finds another less demanding suitor and pays a tribute to make the financial knight go away. Chastened, the youthful king vows to mend his ways. The people (or at least Jay Hancock of the Baltimore Sun) want the king’s head but the king’s knights of the rectangular table believe the guy who almost killed the company also saved it.

Compared to what has happened to some of Baltimore’s other famous companies, they may be right.

For all the drama, at least Constellation has solid assets that create real heat and light; and its shares, while down substantially from their high, still have value.

Barely visible in Constellation’s penumbra are far bigger corporate disasters in Baltimore. Like MuniMae, which has become a black hole that has sucked out almost all of its shareholder’s equity.

At the beginning of February, MuniMae announced that it had finally completed its 2006 financial audit. That audit showed shareholder equity of about $668 million. Today, the company is in default under its loan agreements; its stock price is 25 cents a share and its market capitalization is less than $10 million. MuniMae’s liquidity problems resulted in its auditors issuing a “going concern” opinion that casts substantial doubt on the company’s ability to survive.

It is likely that MuniMae’s failures are a result of the financial and real estate vortex that has mercilessly sucked otherwise good companies into near oblivion. Like Constellation, management took risks with leverage that have now come home to roost. But unlike Constellation, management hasn’t yet found a way to salvage the company. It is trying to sell assets to raise cash, but its assets are hard to value since many are securities that are collateralized by real estate. In this market, whatever they are able to sell may be too little and too late to save the company.

Another company that has been orbiting in never never land is NexCen Brands. NexCen has become very adept at reincarnation, so much so that it is unrecognizable from what it was at birth. For those with a short memory, NexCen used to be Aether Systems, which became a dotcom disaster (but not before that private equity that fueled its rocket stock price got a great return). With not so exquisite timing, it then transmogrified into a mortgage company before jettisoning that identity and acquiring a variety of lesser known retail brands that include ice cream, pretzels, cookies and shoes. NexCen’s stock is currently 7 cents a share, down from its 52 week high of $4.31 and light years from Aether’s stock price that was inflated to several hundred dollars a share in the dotcom craziness.

Others have tried to make these individual brands work in far less challenging economic climate and have failed. The track record of companies that own multiple, disparate brands has not been good especially ones as different as shoes and pretzels.

If nothing else, NextCen has demonstrated an instinct for survival. But at its current stock price, it would take about 1500 shares to buy a pair of Nike’s and a pretzel.

Stockholders might want to take that deal.

Apology Schmology - Michael Phelps and Tom Daschle

noreply@blogger.com (citybizlist) — Tue, 03 Feb 2009 18:18:00 +0000

Michael Phelps and Tom Daschle have a lot in common. They are both in the public eye by virtue of their significant accomplishments. They both suffer the conceit of entitlement. They both got caught. And, they both gave what is now becoming a ritual apology for their indiscretions.

In the process, if anyone has noticed, the notion of an apology has lost all meaning.

That Michael Phelps had his head in clouds of marijuana smoke shouldn’t be surprising for a kid (yes, 23 is still a kid), who almost literally, has had his head underwater for the past decade. Michael’s training prepared him to win 8 gold medals in Beijing but there was little that prepared him for the adulation and endorsement millions that he received after winning those medals. That he smokes marijuana shouldn’t be surprising. The reality is that many young men and women use marijuana recreationally. Hey, two of our past three presidents have admitted to drug use - all three if you count alcohol abuse.

Phelps’ apology obviously was written by his advisors. It smacked of insincerity, but it was enough to provide cover for companies like Speedo and Omega who pay Michael millions. They have a big investment in his image, and the image has to be protected. So, the kid needed to apologize!

Most everyone, especially those of his generation who smoke weed and drink regularly, won’t be persuaded that Phelps’ apology is real. It’s the adults who make a living off Michael who needed his “apology’ to protect the wholesome image of their product.

Michael Phelps was perfect in the pool, but like every other young adult, he is learning the consequences of his actions in the real world. As a 23 year old, he didn’t understand that image is everything and that his life now belongs to the companies that pay him the endorsement dollars. His Faustian bargain is that in return for fame, he has to give up being who he is.

Which brings us to Tom Daschle. What we know is that he (and Tim Geithner) knew they owed taxes and didn’t pay it until they were forced to. We all know the tax code is complicated; many of us make mistakes. Probably some people cut corners knowingly. Some get caught; most don’t.

Daschle did. So he apologized.

As a man in the public eye, and an adult, Tom Daschle at the least should have paid more attention to his tax situation. He knows full well that people in public life come under more scrutiny than the rest of us. A man of Daschle’s experience should’ve known better.

No one questions that Daschle competence; he knows the challenges that the country faces in the health care arena better than most. But Daschle’s competence isn’t the question; his judgment is.

If anything, Daschle’s bigger error in judgment was in not telling President Obama of his tax problem until after Mr. Obama nominated him.

Even if one is to forgive his tax “error”, it is hard to explain his hiding knowledge of these “errors” from his boss. As a veteran politician, Daschle knew that this would put the President on the defensive once the information was disclosed, as he knew it would be eventually.

It was unrealistic to expect that a young and inexperienced Michael Phelps would be able to live up to the image of a super hero outside the venue that made him one. The lesson of Phelps is that he is young and naive and made a mistake. His handler-drafted apology sounded insincere, but Phelps deserves some slack.

But we had a right to expect more from Tom Daschle.

At least he finally recognized that his self serving apology wasn’t good enough.

For that, we can thank him.

Hard Times, Hard Choices

noreply@blogger.com (citybizlist) — Wed, 28 Jan 2009 14:43:00 +0000

The bleak economic news du jour is that in December, for the first time since 1976 when the Bureau of Labor Statistics first started tracking the information, the unemployment rate went up in all 50 states. The national unemployment rate for the month was 7.2%. Michigan and Rhode Island (Rhode Island?) had the worst unemployment rates at over 10%.

Maryland continues to lose jobs; so it is small consolation that amidst all the gloomy news, our state’s unemployment rate of 5.8% was still one of the lowest in the nation. Last week, a grim Governor O’Malley outlined the budget cuts the state would be forced to make to cover the $2 billion deficit that Maryland’s government is facing, including cuts to schools (which I feel should be avoided). The cuts the Governor outlined were based on Maryland’s receiving $350 million from the $825 billion stimulus plan put forth by the Obama Administration.

Now the news is that Maryland could get up to $3.5 billion over two years from the stimulus package. About half the money is to pay for Medicaid, education and unemployment insurance. The other is more generally designated for “balancing the state’s budget”.

As a result, the Governor has postponed any action on budget cuts. President Obama warned that we would all have to make hard choices, but that may not apply to Maryland government if we get all this money.

In previous recessions, budget cuts have been finessed by various means to minimize their impact on state services in the hopes that the economy would improve, revenues would rise, and further cuts could be avoided.

This recession has already been severe; and the economy is getting worse as companies continue to announce layoffs. No one knows how long it will continue. More concerning is that no one knows if the stimulus package will turn the economy around. If it doesn’t and the recession continues, Maryland is likely to face continued deficits.

Even though Maryland’s economy is cushioned by the employment that is tied to federal government, our state’s overall economic health is still tied to the national economy. If the economy continues to go down hill, we are going to face further problems.

These clearly are not normal times. The $3.5 billion will be used to avoid making budget cuts to necessary services and education, but aside from those, Maryland should avoid the temptation to postpone tough decisions by using remaining amounts to balance the budget. Maryland government officials should be cautious and plan for continued hard times. We shouldn’t count on the stimulus to avoid cuts that are needed to address the budget imbalance the state is likely to continue to face.

Budget cuts aren’t the only option. I was glad to see Senate President Mike Miller call for a gas tax increase as a way of generating new revenue. A modest $.10 increase in the state’s gas tax could produce $300 million in revenue annually that can be used for much needed transportation projects that can also create jobs.

Making budget cuts and increasing the gasoline tax are not going to be popular as it requires more pain to be borne by the citizens of Maryland. But it is up to our leaders to explain why they are necessary in these extraordinary times.

There are tough choices to be made – but responsible leadership requires making them.

Happy New Year (?)

noreply@blogger.com (citybizlist) — Wed, 07 Jan 2009 20:58:00 +0000

Most of us can say good riddance to 2008. As 2009 unfolds, good news is still hard to find. But why not try to be hopeful?

First, oil and gas prices are down substantially from their highs last summer. Gas at $1.50 feels like a bargain, and it is. The deflation in energy prices is directly affecting other commodity prices – food is cheaper for one thing. While you may not see the benefits of this directly, your local grocery chain and restaurants are happy to see their costs of goods declining. And if they are making money, that will be good for employment.

Another area of potential savings is from lower interest rates. With mortgage rates at around five percent, there is money to be saved in re-financing your home loan. Companies with debt are also benefitting as their costs of borrowing have declined.

While not all of the massive spending that will be targeted by the Obama administration to infrastructure projects will find its way into the economy immediately, there may be enough to improve the job picture by the end of the year. If employment stabilizes, consumers may see that the worst is behind them, and they may start to spend some of these “savings”.

That is the optimistic view, but even if it comes to pass, it won’t help state and local governments where tax receipts continue to decline. Here in Maryland, the Governor and legislature must find $450 billion more to cut in order to balance the state budget before the end of the fiscal year in June. And the projected deficit for 2010 is $2 billion – don’t be surprised if that estimate increases.

President-elect Obama just announced the appointment of a Government Performance Officer to improve government efficiency and budget practices. Governor O’Malley should do the same here in Maryland.

Budget cutting is necessary, and there is no doubt that there are programs that aren’t delivering any bang for the buck and should be cut. But it is hard to imagine that education is one of them.

Education is a priority in Annapolis except when spending has to be cut. Local education aid is on the cut list, as are reductions to state colleges and universities. Maybe money targeted for education should be spent differently, but less money isn’t going to make schools better.

It is not likely that anyone is going to call for a tax increase – the state already raised some taxes last fall and the State Department of Transportation just announced an increase in tolls and EZ pass administrative fees.

But there is one option left that makes sense from several standpoints, and that is increasing the state gas tax.

We all suffered when gas prices went over $4 last year. We also adjusted by driving less.
Placing a tax on gas when it was $4/gallon would have been painful. But at a $1.50, we can all afford a gas tax increase at this time. There are recommendations to raise the federal gasoline tax, but Maryland should not wait for the Congress and federal government to act first.

That increase could be used for transportation projects that would create jobs, and as was done in the past, some money could be “borrowed” from the transportation trust fund to support local aid to education.

No one likes a tax increase, especially now that every dollar matters. But given the “bonus” we have received from lower gas prices, raising the gas tax makes sense to both soften the blow of budget cuts, and as a source of revenues that can help stimulate the state’s economy.

Common sense is often a casualty of fear; a proposal to increase the gas tax would generate a lot of BTU’s of heat in the halls of the State House from those who have to go before the electorate in less than two years.

There are no easy choices; but there are right ones and raising the gas tax is the right thing to do.

The Sun Isn’t Rising

noreply@blogger.com (citybizlist) — Tue, 09 Dec 2008 21:19:00 +0000

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.

Bad News Rising

noreply@blogger.com (citybizlist) — Tue, 02 Dec 2008 17:27:00 +0000

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.

Exploding Stars

noreply@blogger.com (citybizlist) — Mon, 22 Sep 2008 21:11:00 +0000

In a stunning series of events, the last few weeks irrevocably changed Wall Street. With aftershocks that not only affected Pratt Street in Baltimore, these events may have determined who will occupy 1600 Pennsylvania Avenue next year.

The exploding stars that were sucked into the black hole of the mortgage and credit crisis included the biggest names in investment banking and insurance, and Baltimore’s own Constellation Energy.

The best and the brightest weren’t very good or very bright as it turns out; but they were at least smart enough to give themselves great salaries and bonuses while the fun lasted. And while the good times rolled, they gamed their boards of directors into handsome golden parachutes without regard to whether their companies went down the drain sucking shareholders’ value with it.

As Chairman and CEO, Mayo Shattuck probably implored Warren Buffet to, "Take Constellation Energy, please!" Nominally an energy company, CEG made outsized profits mainly from its energy trading operation that was built on the same type of leveraged borrowing that took down Lehman. The company put itself at risk by betting that its ratings would not get downgraded, knowing (or should have) that it never had the collateral it would need if it did. Where, you might ask, was the board of directors when these decisions were made to bet the company?

Shattuck will be able to attend his last Constellation Golf Classic next month knowing that he will be rewarded with an $18 million + payout that he will take from the sale of CEG. Not so lucky are the thousands of CEG shareholders who saw the value of their shares cut in half in one day.

This latest example of excessive CEO compensation is all the more outrageous given the circumstances around this latest collapse. Let's hope it translates into legislation that places limitations around what companies pay their CEOs, and makes boards of directors more accountable.

It is apparently a goal that the two presidential candidates share, yet neither inspired much confidence in the face of the panic that has enveloped the financial system. Oblivious to the fact that what motivates Wall Street is greed (no one ever accused investment bankers of being in business to make America better), McCain blamed greed even as he defended his own advisor Carla Fiorina’s $20 million severance from Hewlett Packard. Missing that little bit of irony is another example of the cluelessness that is becoming a worrisome pattern for the GOP nominee. But "the best defense is a good offense" (unless it’s the Ravens), as McCain used the line to dodge responsibility for the laissez-faire policies he supported that are at least partially responsible for the excesses he now claims to deplore.

At first, Obama didn’t do much better when his running (at the mouth) mate Biden decreed that they opposed a bailout of AIG. But Obama recovered quickly by supporting Paulson and Bernanke’s rescue plans that, for the time being, stopped the hemorrhaging.

This latest economic kick in the groin should give Obama the election he is seeking. However, with almost a trillion dollars more debt piled onto the Bush deficits and worries of a recession giving way to depression fears, he'll be getting no honeymoon.

Obama’s Presidential Pretensions

noreply@blogger.com (citybizlist) — Fri, 01 Aug 2008 21:10:00 +0000

Last week, there was mostly fawning in the press over Obama’s tour d’Europe while ridicule accompanied McCain’s tour of a grocery store.

While the democratic nominee was acting presidential, McCain helped a mom pick groceries in Pennsylvania. Obama scaled oratory heights in Berlin; McCain just looked awkward in Bethlehem. Obama’s trip was a tour de force; McCain’s grocery store visit was a tour de farce.

The press fed the excitement over Obama with one reporter rhapsodizing that the trip was “a slam dunk success”. (Where have we heard that phrase before?) Obama honed his foreign policy credentials as he lunched with the troops, rode in a helicopter with General Petraeus and met with Prime Ministers and Presidents.

Though McCain was once in command, the press liked the image of Obama acting in command. Obama’s speech in Berlin was favorably compared to ones given in the same city by Presidents Kennedy, Reagan and Clinton. All that was missing was a band playing “Hail to the Chief”.

The political winds are blowing Barack Obama’s way. The economy is in the tank, and it costs more to fill your tank. Your house is worth less, and many Americans are losing theirs. Abroad, we are still bogged down in Baghdad, the Taliban is back in business and Iran is increasingly irrational.

If you are Obama or a democrat, you have to like his chances. What’s not to like?

For starters, Obama is acting like he is president before being elected president. With all the pomp and circumstance surrounding his excellent European trip and the accolades to which he returned, the risk for Obama is that people at home might view him more pompous and presumptuous than presidential.

We Americans don’t much like people who get too big for their britches. We tend to want to cut them down to size. In elections, that usually means we vote for the other guy. Al Gore was smarter than George Bush and wanted you to know it. Gore was too much of a smarty pants. Bush was the guy you wanted to have a beer with and shoot the breeze. John Kerry gave the impression that instead of shooting the breeze, he would rather enjoy the breeze on his veranda with a glass of champagne–hardly something most voters would relate to. Well, isn’t Obama, with his soaring eloquence more like JFK? Well yes, but JFK was also a war hero and we listened to his rhetoric knowing that he had paid his dues.

Obama lost the primary in Pennsylvania because he bowled gutter balls without removing his tie, and wouldn’t drink shots like Hillary. To the voters of Pennsylvania, Hillary was more of a guy than the guy.

With polls saying that voters are more concerned about the economy than foreign affairs (we needed a poll to tell us that?), the picture of McCain looking like a shlub shopping in a Safeway, empathizing with a mom over the price of milk while Barack was in Berlin and Paris, just might turn out to be shrewder politics than we or even McCain first thought.

Obama’s trip might have been a slam dunk success, but the last time we heard the term “slam dunk” was before we invaded Iraq. McCain is hoping that Obama’s foreign foray will lead him to a similar fate.

July Campaign Follies

noreply@blogger.com (citybizlist) — Thu, 24 Jul 2008 02:18:00 +0000

The contrast between what Barack Obama and John McCain were doing this week tells a lot about the state of the two campaigns. While Obama was on a rockstar-like tour of the Middle East, McCain was in Baltimore (hardly a GOP bastion) for a fund raiser at the Center Club.

Obama was trailed by the three network anchors, and his meetings were front page news.

Meanwhile, McCain and his Maryland supporters couldn’t even fill the room in the cozy confines of the Center Club, which is hardly the kind of venue one would associate with a presidential fundraiser. The Maryland GOP spun the fundraiser saying that even though just 200 people attended, the event raised over $1 million dollars. Their economic analysis of the fundraiser is as fuzzy as McCain’s economic plan- even at the maximum of $2,300 a head. At best they raised about half a million dollars, which is 1/100th of what Obama was able to raise in June.

According to David Nitken at the Sun, McCain’s refrain at his Center Club soiree was that he knew how to “win wars”. McCain has contrasted his support for the successful surge in Iraq and “winning” there with Obama, who, on his plane dubbed “O Force One”, has proposed getting out of Iraq in 16 months and putting more military oomph in Afghanistan.

Instead, however, the challenge for the next president may be how to win a war with Iran.

The not so quiet talk is the growing likelihood that Israel will conduct a pre-emptive strike against Iran’s nuclear facilities. The window for such an attack is narrowing as Iran continues to improve its air defenses with weapons purchased from Bush’s buddy, Vlad Putin. And, as with previous attacks against Iraq’s and Syria’s nuke facilities, the Israelis won’t ask for permission from the U.S. before bombing. They will also know that the Bush Administration would support such an attack – which is another reason why Israel may want to act before the new president takes office next January.

Israel has to be hopeful that Arab countries, which are equally fearful of a nuclear Iraq, will be quietly supportive; and that Iranian moderates will be emboldened to take down Ahmedinejad and the religious radicals.

But it’s a big gamble. Iran will retaliate. Iraq, which appears stable now, may see its Shiite majority rise up to support their Muslim brothers in Iran and attack U.S. forces. Other countries in the region may be drawn in despite intentions to the contrary. At the least, the price of oil will rise dramatically over fears of supply disruptions. Get ready for $200/barrel and $6 gas.

Beyond that, all that is clear is that the next president will have a hell of a mess on his hands.

And as far as McCain’s boast at the Center Club this week that he knows how to win wars, he just may get a chance to win another.

Baltimore Beefs

noreply@blogger.com (citybizlist) — Thu, 29 May 2008 16:15:00 +0000

Two recent articles have me pondering the glacial ways of government and how process has become more important than progress.

In early May, Mayor Dixon held a "summit" regarding the proposed Red Line rapid transit route in Baltimore. The Red Line would run from the Social Security headquarters on the east side of town, through downtown and Harbor East, to the Johns Hopkins Bayview campus. In the face of increased traffic and expected population growth from new jobs moving to the area because of BRAC, the project’s benefits were obvious even before gas prices hit $4 a gallon.

This project has been on the drawing board for years. Two years ago, I went to a community meeting in Canton where city and state transportation officials presented schematic drawings of possible routes and station locations. What caught my eye was the comment that construction on the project could begin by 2012 with completion in 2016 (subject to funding, the website is quick to note).

That is eight years from now!

Mayor Dixon stated that community involvement is crucial. That's fine and important; but it is hard to understand why that should take more than the two years it has already been going on. As for funding, yes, it won’t come cheap at around $1 billion (think of the jobs). Nevertheless, this ought to be a pretty high priority for our political leaders at both the state and local level.

A second article noted that the City Board of Estimates' approval of a PILOT for the Fitzgerald, a new apartment project and parking garage that will benefit the University of Baltimore, was delayed nearly three years after requests for proposals were submitted. The developer of the project noted that, had he been doing the project on his own, he could have broken ground a year ago. What was the cost of that delay?

Last year I went to an exhibit in New York on Robert Moses. Moses built parks, highways, bridges, playgrounds (658 of them), housing, tunnels, beaches, and civic centers; and he is largely credited (and criticized) for the New York City we all know today.

Moses was controversial and not all of his projects were considered successful. Like our Mayor Schaefer, he was a “get it done now” kind of leader who was impatient and disdained his critics. Moses famously said, “Those who can, build; those who can’t, criticize”.

We could use a little of that spirit in getting the City’s Red Line built a lot faster.

One cautionary note, however: Since I didn’t build it, I am going to criticize the new Hilton Hotel that now pollutes the view from beyond Camden Yards. The hotel may be necessary, but was it necessary to make it so ugly? Its presence detracts from the beauty of Oriole Park and will be a stain on Baltimore’s skyline for generations.

Note to Mayor Dixon, please get it done now, but make sure it looks nice. Generations of Baltimoreans will thank you.

Should Obama Punch Hillary’s Ticket?

noreply@blogger.com (citybizlist) — Wed, 14 May 2008 13:59:00 +0000

After almost five months of primaries and caucuses, with almost as many elected and super delegates as Obama, Hillary Clinton and her supporters can make a case that she deserves to be on his ticket.

It’s a legitimate case, worthy of some consideration, but not much. Hillary’s negatives would be a burden to Obama.

When Hillary went negative to negate Obama, her negatives soared. In New Hampshire, Obama said that Hillary was likeable enough, but today not enough people like her. Polls show that her negatives now outweigh her positives.

Plus, Hillary and Bill are now a double negative that has been over exposed. Bill accomplished what his impeachers couldn’t. His petty performance diminished him, and deep-sixed his wife.

As the first serious woman candidate for president, Hillary could have claimed the theme of change from Obama. Voters wanted inspiration, not experience. In a year of change, she didn’t get it so she won’t get it.

That said, Obama needs to extend an olive to the branch of the party that supported Hillary. Too many Hillary supporters say they will vote for McCain or stay at home. A dream ticket is doubtful, so who else is on the list?

A double play would be New Mexico’s Governor Bill Richardson who could counter McCain’s foreign policy experience and appeal to Hispanics whom Obama needs to capture. But Richardson is too nice a guy, and Clintonistas like Carville consider him a traitor for switching his allegiance to Obama.

How about Hillary supporter Strickland of Ohio. Who’s he you ask? So will most Americans.

In keeping with his theme of change and to capitalize on Hillary’s support with women, a particularly intriguing choice would be Missouri’s Senator Claire McCaskill.

But Obama himself epitomizes the change that he espouses. Too much change may be too much.

What Obama needs to do is reassure a public that will like his youth but question his experience. He needs to reach out to the moderate democratic demographic that supported Hillary. He needs someone tough to tackle McCain. The GOP is already selling fear. He needs someone that the Republicans will fear.

And if he can swing someone from a swing state, so much the better.

Memo to Barack: the tough guy you need has been a district attorney and a big city mayor. He carried Clinton to a win in the key Keystone State that you’ll need in November. This is a guy who can land a punch on the GOP for you. Pick the man from PA – Ed Rendell.

Maryland’s Democratic Delegate Math

noreply@blogger.com (citybizlist) — Tue, 18 Mar 2008 14:47:00 +0000

According to CNN, as of today, Barack Obama leads Hillary Clinton by 139 delegates in the race for the Democratic Party nomination. Only real political junkies can explain how the Democratic Party apportions its delegates; but the net effect of this arcane process is that if Obama and Hillary continue to split the remaining primaries, Obama will still lead in the number of committed delegates when the voting is all done. He is also likely to continue his lead in the national popular vote and will have won more states than Hillary.

That’s why the focus is on the Party’s “super delegates” and how they will vote. Clinton says that each super delegate needs to make his or her own judgment and vote for the candidate who can win in November. Obama says super delegates should follow the popular will of democratic voters in the primaries and vote for the candidate who has won the most delegates.

After the primary election in 1980 when Ted Kennedy tried to pry away delegates committed to Jimmy Carter, the Party created the Hunt Commission to come up with new rules to govern how delegates elected in primaries or caucuses should vote. Rather than requiring elected delegates to be bound to a particular candidate, the guidelines were loosened to require elected delegates pledged to a particular candidate to vote for that candidate “in good conscience”. But Members of Congress still complained that they didn’t have enough say in the party nominating process; so the Hunt Commission created the concept of super delegates. Like the old soviet politburo, party officials were given a special role in the nominating process. The concept was that by virtue of their exquisite political sensibilities, elected officials would be best able to respond to “changing circumstances" and exercise their judgment to pick the best nominee.

Since then, the primary process has served up the nominee without controversy, and the judgment of super delegates hasn’t been put to the test. Though in retrospect, the savvier of them might have saved the Party from the Dukakis debacle of 1988.

It is pretty clear from reading the Hunt Commission report that super delegates were created precisely to deal with a situation like that Party is facing today. Jim Hunt, the eponymous chair of the Commission said that elected officials could serve a role choosing the Party’s nominee by making a “reasoned choice" when the will of the voters is not clear.

What is at stake is the meaning of "reasoned choice". If “reasoned choice” means responding to “changing circumstances”, then it is hard to see what circumstances would require super delegates to reverse the vote of Democratic Party voters.

The case for following the will of the voters is especially compelling here in Maryland. Super delegates would be hard pressed to give a reasoned explanation as to why they should allow Hillary to win a majority of their votes after Obama won Maryland’s democratic primary by a super margin of 25 percentage points (61% to 36%). Obama won 27 delegates to Clinton’s 19. Yet by one count, of the 27 Super Delegates in Maryland, ten are committed to Clinton and only four are committed to Obama; 13 remain undecided. For Obama to equal his margin of victory in the primary, he would need to get a total of 16 super delegates. To do that, he would need 12 of the remaining 13 uncommitted delegates, or get some committed to Hillary to switch their allegiance.

The Hunt Commission gave the super delegates the ability to exercise discretion. But absent a compelling reason, Maryland’s super delegates ought to reinforce the will as expressed by the voters in last month’s primary and cast their votes for Obama.

Cell Phony

noreply@blogger.com (citybizlist) — Thu, 24 Jan 2008 12:39:00 +0000

The past three days, world markets have been whipsawed over concern that the credit crisis is going to lead to a recession in the US. Congress and the President in a rare moment of bi-partisanship are rushing a stimulus package to bring confidence back to the markets, even while it is acknowledged that whatever stimulus is agreed to won’t have an immediate effect.

In Maryland, it is time to throw out last fall’s revenue projections as the downturn in the real estate market will likely extend through 2008. The sales tax increase may only soften somewhat the decline in retail sales tax receipts as worried consumers extend their cautious buying well into the New Year.

Prices at the pump are pinching consumers’ pockets and declining home sales are going to similarly pinch the flow of revenues into the state’s bank account.

The state’s revenue picture will be much worse than projected last fall. The Governor has already played his hand on taxes in the special session last fall before the extent of the credit and housing crisis was known. Now he won’t have much room to maneuver and will have to look to spending cuts to balance the budget.

When the world is falling around your ears, it’s better to find other things to talk about. If you are a member of the Maryland General Assembly and are powerless to stop the credit crisis or the decline in the value of everyone’s home, and you want improve the common good, what do you do? How about introducing a bill to ban the use of hand held cell phones while driving?

Telling people they can’t use hand held phones in their cars is like telling teenagers to just say no to sex. It sounds nice but it isn’t reality. Cell phones have become one of life’s necessities, like cars and computers. We all drive and talk on our phones even though we know it is distracting and potentially dangerous. You don’t need to look at statistics to know that. I use a hands free and I still find that distracting, but no more distracting than kids fighting in the back seat or having an argument with your girlfriend (mine once got pulled over for going 85 in a 60 mile hour zone while yelling at me about something that I am sure justified the $150 fine she had to pay).

Even if a law is passed, this one is guaranteed to be broken by everyone. Enforcement will necessarily be selective. Like speeding, everyone will do it and take the chance of being caught.

Legislators are always looking for ways to do something to justify their pay and existence. It is an understandable human trait. In this case, instead of doing something, we should be satisfied to pay them just to stand there.

Danger for the Democrats?

noreply@blogger.com (citybizlist) — Wed, 16 Jan 2008 21:47:00 +0000

After the split results from Iowa and New Hampshire, it now looks entirely possible that ‘Tsunami Tuesday’ Feb 5, when 22 states hold their primaries, might not decide the democratic nominee for president. The race would move to Maryland and Virginia which hold primaries the next week. Assuming the race between Barack Obama and Hillary Clinton remains up in the air, the role of the party’s super delegates, consisting of its elected officials and party leaders will start to loom over the selection process.

It is not surprising that race has emerged as a sticky issue in the democratic primaries. Barack Obama is the first African American with a legitimate chance to win his party’s nomination. What is surprising is that Hillary’s campaign was responsible for bringing the issue into the public debate with her clumsy comments about Martin Luther King and potential first husband Bill’s reference to Obama’s positions being a “fairy tale”.

Hillary and Bill have to be extremely careful in criticizing Obama. Even Hillary’s campaign message that her experience should trump Obama’s message of hope carries with it the subtext that Obama needs to wait his turn. This condescension is guaranteed to raise the ugly image of a black man not being ready for the White House.

New Hampshire demonstrated the power of identity politics when Obama patronized Hillary as being “nice enough”. Both this episode and Hillary’s emotional moment motivated women to come to the polls in unprecedented numbers for Hillary and enabled her to claim an upset in a state that she had been leading by more than 20 points a few short months ago.

Democrats have relied on black votes to win races around the country and bring them the presidency. With Obama having a real chance, blacks will be able to vote for one of their own notwithstanding Bill Clinton’s prior support in the black community. So, criticizing Obama carries grave hazards for Clinton and the party.

If Clinton wins but she is perceived to cross a racial line in her criticism of Obama, black voters may feel burned. And if the super voters end up choosing her as the party’s nominee, blacks might believe that their best hope got the shaft by the party’s leaders.

Even the Clinton’s record with the black community might not be enough to overcome the resentment that might engender. It probably won’t mean that blacks will vote for the republican candidate, but they could stay home in critical swing states like Ohio, Michigan and Illinois.

With a small turnout of black voters in those states, even in a year when the political winds are strongly behind the democrats, could result in democrats snatching defeat from the jaws of victory next November.

Baltimore on the Bosphorus? The Laureate Connection.

noreply@blogger.com (citybizlist) — Fri, 18 May 2007 13:37:00 +0000

It might seem a bit of a stretch to connect Baltimore to the city of Istanbul where historians say the Christian Church began in 325 AD in Constantinople with the Nicene Creed. There are few similarities between Baltimore and this ancient city of more than 10 million people.

But surprisingly, there is a Baltimore connection with Istanbul, and it runs through the headquarters of Baltimore based Laureate Education, Inc. Laureate has a joint venture with Istanbul’s Bilgi University, one of Turkey’s fastest growing private universities.

Bilgi University is Laureate’s stake in a country of more than 70 million people with a rapidly growing population. With an average age of about 26, Turkey is the youngest country in the European Community.

Only ten years old, Bilgi University has ten thousand students that are divided between two modern facilities - more a series of interconnected buildings than a college campus. One of Bilgi’s missions is to combine higher education with social responsibility. It built its undergraduate facility just a few years ago in an area that was previously a slum. Now the area is in the midst of being revitalized with cafés and shops that cater to the students. The Johns Hopkins medical complex in east Baltimore could learn something from Bilgi about how a university can transform a neighborhood.

Bilgi’s modern and functional buildings are a far cry from our state’s large College Park campus. For one thing, there are no multi-million dollar athletic facilities; in fact, there are no sports teams. Bilgi is a commuter school: think University of Baltimore, not College Park. Recognizing the need to educate its students to compete in the global economy, all coursework and classes at Bilgi University are conducted in English. Bilgi is not unique in Turkey in this regard; surprisingly, there are ten Turkish universities that also conduct classes in English.

Bilgi targets students from middle class backgrounds, but the cost of tuition at around $14,000 a year is hardly middle class in a country where the average income is about $5,000. There are no student loans, but the government mandates that tuition scholarships be awarded to 10 percent of its students.

Laureate and Bilgi want to double the size of the university to 20,000 students in five years, and has ambitious plans to expand campuses throughout Turkey and set up similar universities in the Middle East, Russia and countries like Kazakhstan.

The Laureate story in Turkey stands in sharp contrast to the depressing news from the Middle East. Turkey is modernizing at a fast pace and as its middle class grows, Laureate is helping to meet the growing demand for higher education for young people who want to learn in English. This is a hopeful sign for Turkey, and for Laureate.

Readers Survey - What do you think?

noreply@blogger.com (citybizlist) — Wed, 11 Apr 2007 15:57:00 +0000

I have written about what’s on my mind, what’s on yours? Here are some national and local issues that I hope will elicit a response.

Radio shock jock Don Imus has dominated the talk shows with the reaction to his comments on the Rutgers women’s basketball team. Is his apology enough, or should he be fired?

House Speaker Nancy Pelosi recently went to the Middle East and met with Syrian President Assad. She has been praised for reaching out to our enemies while others call her naïve. Did her trip help or hurt how the U.S. is perceived in the Middle East?

Maryland is facing a structural deficit. It looks like the Governor may propose new taxes on services to raise more revenue. There already have been proposals to raise gas and tobacco taxes.

Should gas taxes be raised in Maryland? Would it make a difference to you whether the money is used for creating more roads or improving public transportation?

Do you think taxes on tobacco should be raised and the proceeds used to provide health insurance to the working poor?

Was the Maryland General Assembly right to ban smoking in restaurants?

A few weeks ago, the City Council approved a pay raise for itself and the Mayor. Do you think they deserve it? If you live in the city, would that affect how you vote?

Whether you live in the city or not, are you satisfied with the current candidates for Mayor of Baltimore and who would you vote for? If not, who would you like to see enter the race?

The race for President has already started. Fundraising among the candidates is at an all-time high. Is there a defining issue for you in this race? Is America ready to elect a woman (Hillary) or an African-American (Obama) President?

Health Care – Food for Thought

noreply@blogger.com (citybizlist) — Wed, 04 Apr 2007 15:23:00 +0000

With one week to go in this year’s legislative session, the General Assembly has yet to come to agreement on increasing tobacco taxes. This should be a no brainer. It is pretty simple: smoking can make you sick and treatments are costly. Making it more expensive to smoke is one way of deterring smoking – and improving health. Banning smoking in restaurants is another. It’s a form of prevention that works. Get on with it.

Using revenue from an increased tobacco tax to pay for health insurance coverage for the working poor makes sense to as too many working people still can’t afford insurance.

At some point however, this particular solution will face its own structural deficit. Health care costs continue to rise, and if price is a deterrent, the revenue source from tobacco taxes will decline.

Polls show that a majority of Americans want universal health care and that government should provide it. Yet, no one has solved the problem how to pay for it and the costs that keep going up. Keeping Americans healthy is devouring more and more of our gross domestic product (GDP)– we already spend much more on health care as a percentage of GDP than Germany, France and Switzerland - and to have universal health coverage like those countries do will likely require even more spending, and higher taxes.

In fact, we are less healthy than our European cousins, but not necessarily because they have universal coverage and we don’t. Obesity and diabetes have been described as reaching epidemic proportions in the U.S. The pharmaceutical industry keeps pumping out new medications to control and treat these diseases, but the main problem resides in the food we eat and our lifestyle choices.

If people expect government to do more in providing health care coverage for everyone, then we ought to expect government to do more to insure that what we are eating is healthy. Several cities across the country are taking initiatives to create food policy councils to determine food policy. New York has its own food czar to coordinate that city’s food policy, but no major urban city has taken the lead on making food an essential part of their efforts to improve the health of its citizens, especially the poor who suffer most from bad nutrition.

Better access to health care is but one answer to the health care crisis that we face. A better and less costly solution is to improve what we eat. Providing healthier foods to children in schools and to our seniors in meals on wheels programs and senior centers, teaching better eating habits, banning transfats in restaurants, and using vacant land in Baltimore City to create urban farms are some of the other things that government can do to help people to become healthier.

Baltimore City Council Pay Raise-Time for Electoral Reform?

noreply@blogger.com (citybizlist) — Tue, 27 Mar 2007 13:59:00 +0000

Headline from Tuesday’s Sun: “Silence from City Council translates into pay raises”. “Without discussion, a vote, or mention on its official agenda”, by not voting to deny itself a pay raise, the Baltimore City Council voted itself, and the next Mayor, a pay raise.

You can’t make this stuff up.

So next fall’s each newly elected member of the city council will get a $9,000 pay raise that will take salaries from $48,000 to $57,000. The City Council President will see her salary go up $18,000 to a whopping $98,000 a year, and the next Mayor will see her or his salary go up $23,000 to $148,000.

Ok, maybe the Mayor should get a raise – it’s a tough job. But, for the Council and Council President, it is hard to justify such a large increase. Isn’t this supposed to be a part-time position? In a city where murders are once again on the rise and students continue to badly under perform, instead of spending $189,000 on a pay raise, the city could have used the money to hire four more cops, or send 15 kids to private schools.

Unhappy Baltimore voters, if there are any (the Sun reported that only one came to a hearing to protest the raises), could decide to vote out of office those who allowed the pay raise to go through. The reality will be that most of the city council members will be re-elected. So you can depend on more of the same from a council that is unlikely to change much after this fall’s election.

In a previous column, I wrote that it would be good for the city to have someone with a business background and record of achievement in another field enter the race to bring a fresh perspective to solving the city’s problems.

Our electoral system makes it too tough though. So maybe it is time for some reform. Baltimore is a one party town. The democratic primary determines the winner and the general election is a formality. Turnout in Baltimore City elections is abysmally low – less than a third of eligible voters decide for the rest of us. This virtually guarantees that incumbents get re-elected, and reinforces the feeling that nothing really changes. Maybe the problem isn’t voter apathy but that voters feel disenfranchised.

There are ways to reform our electoral process so that voters can feel more engaged. One is to make the “primary” election non-partisan, include independents, and have the general election be a run-off between the two highest vote getters. Another is to have an open general election with instant runoff voting. A third would have voters vote for a party; seats in the council would be apportioned proportional to the vote that each party receives. This system is used widely in other countries and allows for more voices to be included in the political process.

Whatever the outcome, let’s start with a debate on how we can reinvigorate participation and attract new people and fresh ideas.

Time For A Gas Tax Increase in Maryland

noreply@blogger.com (citybizlist) — Tue, 20 Mar 2007 16:30:00 +0000

There’s a lot of talk around Annapolis these days about the structural deficit. This is one of those ‘deju vu’ moments: haven’t we heard all this before?

Most of us don’t have a clue about what this really means, or the details of government taxing and spending. Unfortunately, many of our legislators don’t either. But here is the simple primer: our government is costing more than we can afford, or we need to do more and can’t afford it. Something’s gotta give, and it’s usually the taxpayers.

Talk of deficits, structural or otherwise, quickly shifts to how to raise more money to pay for them. Now comes the question of choices that need to be made.

The debate has already started about which taxes to raise, or, to use the euphemism of public policy types, how to ‘modernize’ the state’s tax system. The Governor is rightly cautious about staking out a position before he has all the facts. Broad changes to tax policy will have an impact on the state’s economy, often in ways that can’t be anticipated entirely.

Nevertheless, there is one tax that the legislature and governor should not wait to increase, and that is the gas tax. The gas tax is the best user tax there is. It is simple to understand: those who drive, pay. If there is one thing that we should all be able to agree on it is that our state’s transportation system needs drastic improvement. Roads need to be maintained. Maryland is growing and the simple fact is that we are going to need more and wider highways. And all agree there isn’t enough money to do these things.

It is also a time to start making investments in public transportation. Revenue from gas taxes is one reason why other countries are able to pay for modern and efficient public transportation systems. With the exception of the DC metro, the region’s public transport is only slightly better than a third world country. Baltimore needs a Red Line connecting the east and west sides of the city. The region needs a high-speed rail connection that ties our growing population centers together.

We can also affect the environment and national policy. We shouldn’t kid ourselves that Maryland alone can make a difference, but we can at least set an example for that the federal government should follow. Increase prices of gasoline may reduce auto use, and reduced auto use will lower polluting carbon emissions.

Reduced driving also reduces demand for oil and will drive down world oil prices and the revenue that oil producing countries like Iran depend on to pay for their nuclear ambitions. The collapse of the Soviet Union was as much due to the price of oil going to $15 a barrel as anything else.

Senate President Mike Miller wants to increase the gas tax by $.12. Seems like good public policy to me.

Taking Responsibility at Walter Reed

noreply@blogger.com (citybizlist) — Thu, 08 Mar 2007 20:11:00 +0000

I am not sure why it took a series of articles in the Washington Post to expose the shameful treatment of outpatient soldiers at Walter Reed Army Hospital. After all, the hospital lies only a few short miles from the White House, Pentagon and Capitol Hill.

But lets be glad the Post did since apparently no one else was going to. So this got me to thinking about the concept of “taking responsibility”.

As a nation, we supposedly had learned from the Vietnam war when soldiers returned home and were ignored, or worse, excoriated. Remember the movie Born On The 4th of July ?

This time was going to be different.

The new mantra has been “support our troops”. We heard this even as they went off to a war that was started on faulty and fabricated intelligence.

The politicians made sure we knew that they “supported our troops” even as they sent them off to war without the body armor and armored up humvees that would have saved countless lives and injuries.

We may feel like we “support our troops” but don’t ask the soldiers at Walter Reed and other Army hospitals.

The soldiers hear us saying that we support our troops, but what they see and experience is neglect.

The current outrage over Walter Reed from official Washington is justified, but it has to ring a little hollow for the soldiers and their families who have had a lonely fight with the bureaucracy for the past three years.

It is fair for them to ask, “where has everybody been” ?

Now we are treated to the spectacle of Generals “taking responsibility” and politicians, from the President to Congress, vowing to get to the bottom of this and fix it.

Let’s hope that they finally do.

But all this has made me wonder about “taking responsibility”. Taking responsibility should mean doing your job as you are expected to do it. There used to be consequences for not doing your job. Now apparently all you have to do is “take responsibility”.

It’s as if saying those magical words somehow absolves those responsible from being accountable for their actions. When you have to explain that you acted irresponsibly, isn’t it too late to “take responsibility”?

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